The adage about cutting off your nose to spite your face is alive and well in Detroit. Years of greed and corruption have now come home to roost. Will the pResident bail them out? We may have to wait to see how this plays out but Detroit will set the precedent for other cities looking to declare bankruptcy to get out of exorbitant employee pension plans.
A federal judge has given a green light for Detroit to proceed with its bankruptcy, the largest municipal bankruptcy in history.
The ruling opens the door for the city to cut billions of dollars in payments that are owed to city employees, retirees, investors and other creditors.
Unions and pension funds had argued that the city should not be eligible to use bankruptcy court protections. They said that regardless of the Detroit’s financial troubles, city and state officials did not negotiate with creditors in good faith in an effort to reach a deal on its liabilities.
In his ruling, Judge Steven Rhodes found the city did not meet that threshold, yet he ruled that such negotiations were impractical because of the huge number of creditors, which total more than 100,000. So, ultimately, he concluded that the city filed its petition properly.