After months of warnings, Detroit filed for Chapter 9 bankruptcy protection on Thursday, becoming the largest U.S. city to declare bankruptcy.
The filing was made by Kevyn Orr, who had been tapped as Detroit’s Emergency Manager earlier this year in a bid to help stabilize the Motor City’s finances. Orr said that Detroit is facing $18.5 billion in debt that it simply cannot pay. Michigan Governor Ricky Snyder concurred with Orr’s assessment and agreed to the bankruptcy filing, Reuters noted.
Once the bustling capital of America’s thriving auto industry, Detroit has fallen on hard times as the American car makers faced rising competition from international brands and manufacturers moved operations overseas.
More than a quarter of the city’s population has moved elsewhere over the last ten years. About 700,000 people now call Detroit home, compared to 1.8 million during its heyday in the 1950s. The number of active city workers is dwarfed by retired workers, draining pension funds.
Last month, Orr offered a plan that would have forced deep cuts for pension benefits and bondholders. Creditors spurned the proposal.
Those creditors, who now face massive losses, are expected to bitterly contest the bankruptcy filing. The White House said it was monitoring the situation, but declined to signal any plans to help the city.
The opinions contained in this column are solely those of the writer.
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