by Christopher Freeburn | July 29, 2013 11:08 am
If any Detroit residents — or creditors — thought that the federal government might throw the struggling city a financial lifeline, the U.S. Treasury Secretary has dashed those hopes.
In an appearance on CNN’s State of the Union on Sunday, Jack Lew signaled that Washington had no plans give the Motor City a bailout. Lew acknowledged that the city has “serious financial problems,” but said Detroit is “going to have to work out” any issues it has with its creditors on its own.
Noting that Detroit’s financial difficulties “have been a long time in the making,” Lew said the federal government would supply advice and “the kinds of normal programs” it offers to cities in distress. But nothing more.
The U.S. government bailed out General Motors (GM) and Chrysler after they foundered during the financial crisis, spending $80 billion to put GM back on its feet and selling Chrysler to Italy’s Fiat (FIATY).
However, bailing out Detroit would require Congressional approval, which is considered unlikely in the current political environment.
Detroit filed for bankruptcy protection earlier this month, citing more than $18.5 billion in debts. It is the largest U.S. city ever to file for bankruptcy.
Despite that filing, the city still plans to spend more than $400 million to build a new arena for its National Hockey League team.
The opinions contained in this column are solely those of the writer.
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