Financial Crisis Just a Symptom of Detroit’s Woes

[theworldismine13]

http://www.nytimes.com/2013/07/09/us/financial-crisis-just-a-symptom-of-detroits-woes.html?hp&_r=0

Financial Crisis Just a Symptom of Detroit’s Woes
By MONICA DAVEY
DETROIT — A question unimaginable in most major American cities is utterly commonplace in this one: If you suddenly found yourself gravely ill, injured or even shot, would you call 911?

Many people here say the answer is no. Some laugh at the odds of an ambulance appearing promptly, if ever. In Detroit, people map out alternative plans instead, enlisting a relative or a friend.

As officials negotiate urgently with creditors and unions in a last-ditch effort to spare Detroit from plunging into the largest municipal bankruptcy in the nation’s history, residents say the city has worse problems than its estimated $18 billion debt.

“The city is past being a city now; it’s gone,” said Kendrick Benguche, whose family lives on a block with a single streetlight, just down from a vacant firehouse that sits beside a burned-out home. The Detroit police’s average response time to calls for the highest-priority crimes this year was 58 minutes, officials now overseeing the city say. The department’s recent rate of solving cases was 8.7 percent, far lower, the officials acknowledge, than clearance rates in cities like Pittsburgh, Milwaukee and St. Louis.

“I guess I’ll be glad if someone else takes over and other people run this thing,” Mr. Benguche said. “The way I look at it, the city is already bankrupt.”

Kevyn D. Orr, the state-appointed emergency financial manager for Detroit, has said that the chances of filing for bankruptcy, a possibility that could be decided as early as this month, stand at 50-50. On Wednesday, Mr. Orr is expected to lead 40 representatives of Detroit’s creditors on a bus tour of the city and its blight to let the bleak images of empty lots and shuttered firehouses make the argument that creditors should accept pennies on the dollars owed.

The prospect of a bankruptcy filing — a move that is extremely rare for cities and one that has never happened to an American city as populous as Detroit, with about 700,000 people — worries some residents. They say they fear that bankruptcy would add more stigma to a city that has contracted alarmingly in the decades since it was the nation’s fourth largest, starting in the 1920s, and that it might worsen already bare-bones services.

The notion that assets like Coleman A. Young International Airport, Belle Isle Park and the collections of the Detroit Institute of Arts might be sold — either in a formal bankruptcy proceeding or in a huge city reorganization outside of the court system — has fueled outrage.

“Bankruptcy scares me,” said LaTanya Boyce, a nurse practitioner. She urges her patients to treat health concerns before they become acute because, she said, “if they find themselves calling 911, it’s probably too late.”

But as with many here who have wrestled with the practical realities of living in this city, Ms. Boyce said she would not mind if some entity other than the city took over the management of Belle Isle, a park whose plan was conceived in the early 1880s by Frederick Law Olmsted. Ms. Boyce goes to the park for exercise, wearing a fanny pack that at times contains a gun — “Do you see any city police here?” — and bemoaning several locked restrooms that have portable toilets planted in front of them.

“I would love to see it leased to the state,” she said of the park. “They’d take better care.”

Recent developments among Detroit’s elected leaders have only added to the sense that significant changes in the city are perhaps even preferable. Two of the nine City Council members have resigned. (One said he was leaving to work for the emergency manager’s office.) Then, Charles Pugh, the Council president, had his salary stopped and power stripped by Mr. Orr after the councilman abruptly stopped showing up for meetings and disappeared from public view.

“Where Is Charles Pugh?” a headline at the top of the front page of The Detroit Free Press asked.

“For a lot of people, I think city government has become a nonentity here,” said Kurt Metzger, the director of Data Driven Detroit, which tracks demographic, economic and housing trends in the region. “People almost feel like the city goes on in spite of city government — that city government in this case certainly doesn’t define the city — and that affects how they’re feeling about what comes next.”

Recently, Mr. Orr indicated that Detroit was getting out of the business of electricity distribution. An independent authority is already planning to take control of the city’s streetlights, 40 percent of which, Mr. Orr’s office said, were not working in recent months. Similar handoffs are being weighed for the water and sewer services, and possibly more.

While many who have been through municipal bankruptcies say such moves often mean more budget cuts to city services, Mr. Orr has called for spending about $1.25 billion over the next 10 years on improving city infrastructure and services, including the police. Last week, James Craig, Mr. Orr’s choice for police chief, arrived to face a city that had seen five chiefs in as many years and had the highest rate of violent crime in 2012 of any city with more than 200,000 residents, according to a report by Mr. Orr.

“Whatever the solution is — a negotiated plan or a bankruptcy proceeding — the end result is going to be better services,” Bill Nowling, Mr. Orr’s spokesman, said. “This is all about getting Detroit strong, viable and solvent.”

Frank Ponder, 45, who works at a hospital here, said major changes in the city, even bankruptcy, now seem all but certain. “Everybody had all these ideas about saving Detroit, and nobody’s ideas actually worked,” he said. “At a certain point, you have to stop fooling yourself.”

The East Side house in which Mr. Ponder lives, once owned by his grandmother, is the only one on his block that appears to be occupied. He has been saving money for years in hopes of moving this fall to a suburb, Warren — and he expects to just walk away.

“What can you do?” he said. “Sell it? On that block?”

While corporations announced this year that they would donate money to the city in part to lease new emergency vehicles, there have been times in 2013, the authorities acknowledge, when only 10 to 14 of Detroit’s 36 ambulances have actually been in service. Some of the city’s emergency medical service vehicles have as many as 300,000 miles on them, so they tend to break down.

All this helps explain why Mr. Ponder said he, as so many here, would try to get himself to a hospital before seeking help from Detroit.

“If you have a heart attack, you’re dead,” he said. “There is no such thing around here as ‘in case of emergency.’ ”

 

[88m3]

I thought you guys in detroit were telling me how much things have been improving...

 

[Domingo Halliburton]

they can't do anything right. worst management i've ever seen from a major metropolitan area since orange county in 1994. even the receiver (or treasurer or whatever) cost them like $500 million in interest rate swaps the last couple years.

 

[iceberg_is_on_fire]

I thought you guys in detroit were telling me how much things have been improving...

It's still cold there breh

 

[cleanface coney]

I thought you guys in detroit were telling me how much things have been improving...

it is depending on who you ask imo

as far as the city's finances..yea its fukked up they fukked up too much

for somebody young wanting opportunity to make a stamp in a big city, its here....i mean we cant go nowhere but up

the media is not gonna tell you about the current 5000 interns in and out of the city this summer, or the Bizdom program providing funds for startup companies....people that i personally know doin this, or the grants/scholarships they offering for people interested in computer technology/agriculture/dealing with agriculture and using solar power/real estate grants/medical internships and jobs/dte internships and jobs...thats all here bro i wouldnt boost...

 

[88m3]

they can't do anything right. worst management i've ever seen from a major metropolitan area since orange county in 1994. even the receiver (or treasurer or whatever) cost them like $500 million in interest rate swaps the last couple years.

I fail to see how that is even possible? It's not my specialty by any means but shouldn't it be pretty straight forward on what to do and what not to do.

Maybe when you're dealing with tens of billions of dollars and your credit limit is literally junk. Can't get my head around it.

It's still cold there breh

it is depending on who you ask imo

as far as the city's finances..yea its fukked up they fukked up too much

for somebody young wanting opportunity to make a stamp in a big city, its here....i mean we cant go nowhere but up

the media is not gonna tell you about the current 5000 interns in and out of the city this summer, or the Bizdom program providing funds for startup companies....people that i personally know doin this, or the grants/scholarships they offering for people interested in computer technology/agriculture/dealing with agriculture and using solar power/real estate grants/medical internships and jobs/dte internships and jobs...thats all here bro i wouldnt boost...

that's nice to hear honestly

As for making a mark I'm sure I'd rather be in a developing country risking my money and life than a place like Detroit, and I mean that in the kindest way possible.


Wheres the homie @Blackking

 

[cleanface coney]

I fail to see how that is even possible? It's not my specialty by any means but shouldn't it be pretty straight forward on what to do and what not to do.





that's nice to hear honestly

As for making a mark I'm sure I'd rather be in a developing country risking my money and life than a place like Detroit, and I mean that in the kindest way possible.


Wheres the homie @Blackking

yea its opportunity here, i feel that...alot of people left the state thats tryna do something...even i left for Tallahassee/Ft.Lauderdale when i graduated
where im at mentally the only place that would make me move is South Florida,ATL,somewhere bigger and better and i would have to have my foundation set in place(good money,job offers,degrees,etc)

idk i dont think he been on here today i aint seen him pop in no threads im sure he can provide some shyt he a good nikka and know what he talkin about when it come to the city

 

[Blackking]

Wheres the homie @Blackking

this and stories like this are what you would call a ruse. The people who own the papers and media that put these stories out... are investing HEAVY in the city. If that doesn't tell you everything you need to know.. then other than that fact- Detroit is being boosted up by a technology boom.

There are some issues that need to be full addressed so that the CAC capitalistic plan can take effect like..

housing. poor and middle class black people were crowding up the most valuable land near downtown..soo the people in corktown and cass cooridor were given the 60 day notices to get their black asses the fck on somewhere.

White people who knew the deal long ago, also have purchased all of the commercial property and have acquired the houses in the area.

Anything that doesn't fit into the place is being bankrupted and thrown in the bushes.. and the city counsel and gov officials have no power so they are just quitting their positions and/or being gay pedos. Also other buildings and many schools are being closed. The Institute of Arts was going to be closed.. but the people wouldn't let it, plus it feeds in to the technology and art culture they are trying to promote.

also like @Coney Island said there are madd different industries working together. Detroit isn't the most attractive place, so they are trying harder than they would in most cities... like 10K bonus just to live downtown.. Downtown being clean, for the most part.. shuttles around the city so you don't even have to interact with the poor blacks who haven't been displaced yet.

Also random sh1t like Solar energy, Electronic Cars and Urban Agricultural Farms. The hipster boom is here. Plus the riding on Bicycles and being green is so much now that even a non-givinafukk person like me is cycling n shyt when it's convenient.

Detroit is " Hotbeds of American Innovation" right now. Plus... in the square miles of downtown and midtown.. the people are more cultured, more aware, more educated, and more everything - as compared to the rest of Detroit. After a few more areas are developed you can come here and not even know that bodies might be dropping on the Eastside.

Plus these CAC are smarter than the ones that build up NY and Chi and Seattle, Etc. Detroit is being build the same way except they are keeping that hard core, made in Detroit urban feel to everything.

 

[cleanface coney]

this and stories like this are what you would call a ruse. The people who own the papers and media that put these stories out... are investing HEAVY in the city. If that doesn't tell you everything you need to know.. then other than that fact- Detroit is being boosted up by a technology boom.

There are some issues that need to be full addressed so that the CAC capitalistic plan can take effect like..

housing. poor and middle class black people were crowding up the most valuable land near downtown..soo the people in corktown and cass cooridor were given the 60 day notices to get their black asses the fck on somewhere.

White people who knew the deal long ago, also have purchased all of the commercial property and have acquired the houses in the area.

Anything that doesn't fit into the place is being bankrupted and thrown in the bushes.. and the city counsel and gov officials have no power so they are just quitting their positions and/or being gay pedos. Also other buildings and many schools are being closed. The Institute of Arts was going to be closed.. but the people wouldn't let it, plus it feeds in to the technology and art culture they are trying to promote.

also like @Coney Island said there are madd different industries working together. Detroit isn't the most attractive place, so they are trying harder than they would in most cities... like 10K bonus just to live downtown.. Downtown being clean, for the most part.. shuttles around the city so you don't even have to interact with the poor blacks who haven't been displaced yet.

Also random sh1t like Solar energy, Electronic Cars and Urban Agricultural Farms. The hipster boom is here. Plus the riding on Bicycles and being green is so much now that even a non-givinafukk person like me is cycling n shyt when it's convenient.

Detroit is " Hotbeds of American Innovation" right now. Plus... in the square miles of downtown and midtown.. the people are more cultured, more aware, more educated, and more everything - as compared to the rest of Detroit. After a few more areas are developed you can come here and not even know that bodies might be dropping on the Eastside.

Plus these CAC are smarter than the ones that build up NY and Chi and Seattle, Etc. Detroit is being build the same way except they are keeping that hard core, made in Detroit urban feel to everything.

100% truth perfect post on the situation currently going on right now

thats why i say depending on who you talk to, you will get two different mindsets as far as what Detroit is and what it is about to become

 

[Domingo Halliburton]

I fail to see how that is even possible? It's not my specialty by any means but shouldn't it be pretty straight forward on what to do and what not to do.

Maybe when you're dealing with tens of billions of dollars and your credit limit is literally junk. Can't get my head around it.
]

Yeah the thing is these swaps protect against higher interest rates, its a hedge if you know what you're doing. So you have billions in pensions you can't fund and you issue the bonds (I.e. borrow money) to fund it. You want a locked in interest rate so if interest rates rise you won't be stuck paying millions more in interest rate expenses than you expected. So you enter into a swap which will have you paying a fixed rate on your bonds and the bank will pay you a floating rate based on the market. The federal reserve steps in and basically says we're lowering rates to practically zero to stimulate the economy (this is why rates are so low on things like mortgages now). So now you are stuck paying the fixed rate which is now higher than the floating rate you are receiving. And they ended up in a huge hole.

 

[88m3]

Yeah the thing is these swaps protect against higher interest rates, its a hedge if you know what you're doing. So you have billions in pensions you can't fund and you issue the bonds (I.e. borrow money) to fund it. You want a locked in interest rate so if interest rates rise you won't be stuck paying millions more in interest rate expenses than you expected. So you enter into a swap which will have you paying a fixed rate on your bonds and the bank will pay you a floating rate based on the market. The federal reserve steps in and basically says we're lowering rates to practically zero to stimulate the economy (this is why rates are so low on things like mortgages now). So now you are stuck paying the fixed rate which is now higher than the floating rate you are receiving. And they ended up in a huge hole.

Shouldn't whomever was managing this seen this coming... its not like the Fed hasn't been cutting rates especially after the last 5 years. I get that they could have done well in theory if it was locked in at a lower rate but paying an extra 500 million in interest than they would have otherwise doesn't seem like a winning bet. Which one of the bailed out giants was involved if you know?

If I'm understanding this correctly...

:sconi:

 

[theworldismine13]

The Urbanophile » Blog Archive » Is Detroit the Next Berlin? by Justin Fox

 

[Domingo Halliburton]

Shouldn't whomever was managing this seen this coming... its not like the Fed hasn't been cutting rates especially after the last 5 years. I get that they could have done well in theory if it was locked in at a lower rate but paying an extra 500 million in interest than they would have otherwise doesn't seem like a winning bet. Which one of the bailed out giants was involved if you know?

If I'm understanding this correctly...

:sconi:

yeah they should of. they could of entered into this years ago as well. Some swaps run for 10, 20, 30 years or the life of the planned bond re-payments. you can take either sides of it as well. like they could of paid floating and received fixed. the thing is they could have easily taken an option on it for like a few hundred thousand dollars. i know one of the big wall street banks were involved probably more than one.

swaps are very abstract when you first hear about them. i didn't understand it for awhile when i first started learning about it. but the swap market is something like a $500 trillion dollar market. it's often done between buyer and seller so it's considered private sales and is not regulated much. these are derivatives or what the media will scare you with. but if they're used appropriately and responsibly they provide a great service.

edit: here i found an article http://www.wsws.org/en/articles/2013/04/26/muni-a26.html

Since 2005, Bank of America’s Merrill Lynch, JP Morgan Chase, UBS and other global banks have executed about $3.7 billion in bond sales for the city to cover deficits, pension shortfalls and debt payments, according to Bloomberg News. The debt sales cost Detroit $474 million and included payments for underwriting expenses, bond-insurance premiums and fees for wrong-way bets on credit default swaps, according to the Bloomberg article.

Detroit officials entered into the swaps to hedge against increases in interest rates and thus insure themselves against default on $800 million in pension debt and $1.6 billion in water department bonds.

 

[theworldismine13]

i think the craziest part of the story is dude saying he plans to simply walk away from the house

detroit is what happens when people or the leaders do not have a real economic plan

 

[88m3]

yeah they should of. they could of entered into this years ago as well. Some swaps run for 10, 20, 30 years or the life of the planned bond re-payments. you can take either sides of it as well. like they could of paid floating and received fixed. the thing is they could have easily taken an option on it for like a few hundred thousand dollars. i know one of the big wall street banks were involved probably more than one.

swaps are very abstract when you first hear about them. i didn't understand it for awhile when i first started learning about it. but the swap market is something like a $500 trillion dollar market. it's often done between buyer and seller so it's considered private sales and is not regulated much. these are derivatives or what the media will scare you with. but if they're used appropriately and responsibly they provide a great service.

edit: here i found an article The Detroit crisis and the municipal bond racket - World Socialist Web Site

Really interesting. I figured they were for long terms. So what you're paying for is the "creation of the bonds", and insurance on them. In 2005 I don't recall what the interest rates were but they couldn't have been very high. They tried to take the cheap and what they thought was the safe way out and lost. At the same time I guess they didn't have a choice but to issue bonds since they were so in over their heads with their pension and the water department bonds. I can see why its necessary.