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Not a lot of comment on this, other than to say it jibes with my own personal observations.

From a Salon interview with a former banker:

After this decision came out, Joe Scarborough said to his panel on MSNBC, “The problem came from, you know, unions that, you know, push politicians to overpromise benefits that they couldn’t pay for in exchange for votes and money.” What do you make of that kind of analysis?

Well, it’s just based on preconceived notions and not careful analysis of the circumstances. That isn’t what has transpired over the last five years. Because the data don’t reflect that.

And what do they show?

The data show that the current level of salaries paid out by the city, and benefits that are to be paid out are very moderate … The city over the last five years has tremendously cut its operating expenses, close to 40 percent  – which is mostly salaries — and is now operating at levels of employee per capita that are imprudent. And the benefits, if you look into them carefully, are quite modest …

The time scales that we’re operating in now suggest strongly that this is largely an issue of a devastated tax base and a reduction in state revenue-sharing, exacerbated by some really potentially concerning cash requirements associated with derivatives deals and overly complex and imprudent financial transactions.

Who’s to blame for the devastated tax basis?

There’s a lot of things. One is the policies encouraged flight from the city … There are several other issues … 70 percent of the mortgages were subprime in the city of Detroit — so in one sense the banks caused it, right? So there’s lots of different causes that put them in a position where in 2007, 2008, they were absolutely keyed up to be devastated by the financial crisis and the Great Recession.

To me, it's interesting that Turbeville mentions Detroit's high number of subprime mortgages and that financial entities took advantage of that...Detroit had its own subprime lending bust years earlier than the rest of the country experienced in the mid-2000s.

Read the whole interview, although there's an interesting observation below the fold:

On the revenue sharing, you wrote following the decision that “the bankruptcy was ‘fixed.’” In what sense?

There was evidence produced before the judge that the bankruptcy was fixed, but he concluded that the evidence was insufficient to say that it was …

I’m not a court and I don’t have rules of evidence, so I can draw conclusions based on looking at something that quacks and walks like a duck, and conclude it’s a duck.

There were tremendous incentives … benefits that the state the political forces that control the state derive from this whole thing … The city is largely African-American, largely has a certain political philosophy, and [for] a lot of reasons unions are relatively strong forces in the city and can pursue their political agendas. The state is far more characterized by the kind of philosophies that the Tea Party espouses, right? And it’s a state that’s split fairly evenly. That means it’s a swing state and is in play in federal elections. It also means it can go back and forth in statewide elections.

So it would be in the political interests of the governor and the prevailing forces in the state Legislature to restructure the city of Detroit and reduce the political virility of Detroit and its environs by politic[s], right? So one sort of looks at the series of events, the whole notion of the emergency manager is for the state to take over the political power of municipalities, and in particular Detroit, which is of course the largest city by far in Michigan, and use the occasion of a financial crisis to give effect to their philosophies. So that, as Rahm Emanuel once famously said, no good crisis should go to waste. There was a disincentive to do reasonable prudent things to avoid the worst, if you will … When it came time to deal with state revenue-sharing effective 2012, ’13, the state Legislature elected to reduce state revenue-sharing, particularly as it related to Detroit …

If you look at [the emergency manager’s] recommendations, they’re clearly designed to be based on a philosophy that workers’, public employees’ salaries and benefits should be reduced. And that is not so much based on an analysis of whether they’re too high right now. It is based on a belief that that is directly connected to the power of unions …

The outcome was what they wanted.

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Comment Preferences

  •  Tip Jar (16+ / 0-)

    "Believe nothing, no matter where you read it or who has said it, even if I have said it, unless it agrees with your own reason and your own common sense."

    by grape crush on Fri Dec 06, 2013 at 07:33:08 AM PST

  •  Great analysis, thanks (2+ / 0-)
    Recommended by:
    2thanks, MartyM

    And love the signature!  :)

    "Believe nothing, no matter where you read it, or who said it... unless it agrees with your own reason and your own common sense." -The Buddha

    by Brian A on Fri Dec 06, 2013 at 07:41:48 AM PST

    •  Thanks, and thanks. (2+ / 0-)
      Recommended by:
      2thanks, MartyM

      It was either that or "Wherever you go, there you are" which I first heard in the movie The Adventures of Buckaroo Banzai Across the 8th Dimension.


      "Believe nothing, no matter where you read it or who has said it, even if I have said it, unless it agrees with your own reason and your own common sense."

      by grape crush on Fri Dec 06, 2013 at 07:44:36 AM PST

      [ Parent ]

  •  I think that (4+ / 0-)

    five years seems like far too short a time frame for analyzing what has happened in Detroit. The auto industry has been slowly dying there for decades now. The fate of Detroit seems tied to that.

    •  It is too short. (0+ / 0-)

      And while it's the job losses due to the migration of business elsewhere that gets the most ink - for a good reason, although the actual movement to the 'burbs started before the race riots of the latter 60's - you can go back even further to the 1940's and 50's and find other causes.

      Post-depression and post-WWI, Detroit was where the jobs were at, and people of all backgrounds came here looking for work. They brought their own attitudes and prejudices with them. You had southern whites trying to coexist with increasingly-affluent blacks, who had disproportional representation in the city's political structure and police force. Add in disenfranchisement and unequal treatment under the law and there's a pressure cooker waiting for the right event to make things explode.

      And they did, acting as an accelerant added to the already-occurring flight of business elsewhere.

      You can also talk about political corruption, bad government administration and decision-making, et cetera. Throw a rock, and you'll likely hit something that's part of the problem.

      "Believe nothing, no matter where you read it or who has said it, even if I have said it, unless it agrees with your own reason and your own common sense."

      by grape crush on Fri Dec 06, 2013 at 08:23:09 AM PST

      [ Parent ]

    •  The auto industry didn't "die" in Detroit. It was (4+ / 0-)

      systematically dismantled and exported by the auto company executives.

      There is a very healthy auto industry there still in terms of corporate headquarters and auto executives. They've just sold the factory workers down the river and now jet their executives all over the globe to oversee the industry where it's cheaper to produce, leading to more profits for them.

      Pure greed.

      If the plutocrats begin the program, we will end it. -- Eugene Debs.

      by livjack on Fri Dec 06, 2013 at 08:50:06 AM PST

      [ Parent ]

      •  livjack - the Big Three have had production and (0+ / 0-)

        sales worldwide for fifty years. I believe that all the cars and trucks sold by the Big Three in the US are made in North America.

        "let's talk about that"

        by VClib on Fri Dec 06, 2013 at 06:30:57 PM PST

        [ Parent ]

  •  This EFM Firesale (1+ / 0-)
    Recommended by:
    Steven D

    of a Major American City,

    should be more of a discussion point, than it seems to be.

    Is this a sign of things to come?

    Or an example of Austerity gone Wild?

    Welcome to Red State America, folks.


    •  The GOP looting of American continues... (0+ / 0-)

      ... unabated, apparently, and without alarm...

      What has taken Americans 100 years to build through hard, diligent, continued work is systematically being looted and pillaged by the 1%, who have purchased the government.

      Can the American Revolution 2.0 be that far ahead?
      Not one with guns, but the one that will happen when the sheeple FINALLY wake up and VOTE THE PILLAGING GOP RATS OUT OF OFFICE.

      America's LAST HOPE: vote the GOP OUT in 2014 elections. MAKE them LOSE the House Majority and reduce their numbers in the Senate. Democrats move America forward - Republicans take us backward and are KILLING OUR NATION!

      by dagnome on Fri Dec 06, 2013 at 10:05:17 AM PST

      [ Parent ]

  •  Not persuasive to say (6+ / 0-)
    Recommended by:
    grape crush, Pi Li, ColoTim, Sparhawk, VClib, MGross

    that "the GOP and Big Banks sabotaged Detroit."  I understand that a lot of people want to blame the GOP and Big Banks for all the woes in the world, but it seems to me that while they -- like a LOT of other people and institutions -- may have played some role, the reasons for the bankruptcy go much farther back than "five years ago."  You can't just look at what the city did over the last five years (as one of the quoted segments does).  

    The best discussion of the causes of Detroit's problems that I've seen is this one.   I encourage anyone to read it before adopting simplistic views that attempt to lay all the blame on the usual enemies like the GOP and Big Banks.  

    As for the bankruptcy, frankly, I've not heard any realistic alternatives.  There's no way the federal government is going to come in and bail out Detroit.  There are many other municipalities that have financial issues specifically related to long-term pension obligations, although not yet at the crisis point.  If the federal government bails out Detroit to save its pension system, then it is essentially saying to all of those other cities, if you don't get your house in order, the federal government will step in and bail you out.  And I can't imagine the federal government doing that.  

    If someone has a realistic solution to the situation other than bankruptcy, I'd like to hear it.  

    •  why not? they had no problem doing it for the big (1+ / 0-)
      Recommended by:

      banks you think should not be blamed...

      Oh yeah, bail out the corporations and bankers, but never the people.  I forgot.

      If the plutocrats begin the program, we will end it. -- Eugene Debs.

      by livjack on Fri Dec 06, 2013 at 08:52:22 AM PST

      [ Parent ]

      •  Sigh. Not the same. (3+ / 0-)
        Recommended by:
        Sparhawk, VClib, MGross

        the bank bailout -- which I did not like, frankly -- was in the form of a loan.   After about four years, the loans were essentially paid back.

        If there was some prospect of Detroit paying back a bailout in the next five years, the yes, I could see it.  But there's not.  That would just be more borrowing by Detroit, which is what got the city into trouble in the first place.  

        I certainly can see if the federal government wants to do temporary LOANS to municipalities, with a LOT of strings attached to make sure that the loans are repaid in four to five years.  But that wouldn't work for Detroit, because -- absent bankruptcy, where they can restructure all of their other debt -- there's no prospect of Detroit being able to pay in back in the next few years.

      •  livjack (1+ / 0-)
        Recommended by:

        Do really believe it's that simple?

      •  livjack - would the City of Detroit take loans (1+ / 0-)
        Recommended by:

        on the same terms as the TARP loans to the banks? The banks paid the TARP loans back, with interest, early, and with performance kickers. Could Detroit show a financial plan that would allow them to do the same?

        "let's talk about that"

        by VClib on Fri Dec 06, 2013 at 06:25:59 PM PST

        [ Parent ]

    •  Detroit is an interesting case with the high (0+ / 0-)

      percentage of people, and hence tax base, leaving the city.  Detroit hasn't had the money to keep maintaining the infrastructure (including staff) for all their territory, but they also don't have the ability to just shut down neighborhoods, remove abandoned houses and stop servicing them with electricity, water and all the other services.  Detroit wouldn't have a problem (I don't think, and since I'm not an urban planner or economist, my opinion is worth less than the pixels on this page) with pensions if they still had the population they had back in the 70's and 80's.  

      I don't have a solution either, and the ones that I sometimes come up with tend to be very drastic, socially disruptive and expensive, like urban removal of miles of neighborhoods and relocating the remaining population into a much smaller urban core surrounded by square miles of greenbelt or unincorporated areas.  The people there wouldn't like it, it goes against even some portions of the US Constitution (depriving people of property, though we've seen it can be done for government and in rare circumstances, private benefit) and I know I don't get to decide what is best for the people of Detroit, Michigan from my insular world, but if I were made Emperor I might see what that route could lead to.

      In some ways, New Orleans was a similar experiment after Katrina.  It used to be full of more progressive people, but the population dispersed after the hurricane and the policies put in place, including restrictions making it hard for people to return and rebuild, kept NOLA from being what it was beforehand.  

      •  As I'm in New Orleans, (4+ / 0-)
        Recommended by:
        grape crush, Sparhawk, nextstep, VClib

        I recognized the similarities between what you are suggesting and what people were suggesting after the Army Corps of Engineers Disaster (what you call Katrina).  The big difference, of course, is that people here did not voluntarily leave.  They were essentially thrown out by the incompetence and deception of the Army Corps of Engineers since the late 1960's.  So, given the tools to overcome the ACOE destruction, people were anxious to return to their lives here.  

        I would certainly challenge this:


        but the population dispersed after the hurricane and the policies put in place, including restrictions making it hard for people to return and rebuild, kept NOLA from being what it was beforehand.  
        Yes, it was very difficult for many people to return.  Personally, I lost my home and pretty much everything that we did not take with us when we evacuated.  And after the ACOE disaster, there was talk about shutting down sections of the city.  Technically, it was not done, but practically, people knew that sections like Gentilly would come back sooner than New Orleans East. And the city was assisted in recovery by investment money coming in after the ACOE disaster.

        As I sit here in downtown New Orleans, I don't think that anything has "kept NOLA from being what it was beforehand."  There have been changes, but the city is doing well (Mayor Landrieu has done an admirable job) and we weathered the recession far better than most areas.  You should take a trip to see for yourself.  

        •  I visited in February of this year, but didn't (0+ / 0-)

          stray out of the French Quarter (which fared better than other areas).  That limited experience, plus not having been to NOLA in any real sense to see what it was before, keep me from having your level of view.  I'm glad that you feel the city is doing well, but I don't hear you saying that it is like it was pre-disaster.

          Much of my comment on NOLA had to do with the stories I read about the population changes in the aftermath of the ACOE disaster, as well as reports on the shift in electoral politics that made Republicans a higher percentage of the population all through southern Louisiana.  What I saw in February was limited to the view from the airport (people still repairing homes from the hurricane last year) and talking with various people who had opinions on the before and aftermath.  They generally felt the city was back up on its feet, though it had changed.  I declined to take one of the disaster tours that exist, however, to see areas like the Lower 9th Ward where people lost lives and property.  

          •  Frankly, in some ways (2+ / 0-)
            Recommended by:
            ColoTim, VClib

            we can see it's better than pre-ACOE disaster.   There are major improvements that may not have come about absent the ACOE disaster. There's been an influx of young people seeing the city as an opportunity to build careers in a number of different areas.  The medical corridor being built now is going to be awesome.   On the other hand, some areas, of course, are not as rebuilt as others.  

  •  not so much a swing state (1+ / 0-)
    Recommended by:

    "And it’s a state that’s split fairly evenly. That means it’s a swing state and is in play in federal elections."

    It's Been a quarter century since a republican won there.

    2012 Obama +10
    2008 Obama +16
    2004 Kerry +4
    2000 Gore +5
    1996 Clinton +13
    1992 Clinton +7

    1988 Bush-41  +8

  •  Thanks for this. (2+ / 0-)
    Recommended by:
    grape crush, urnumbersix

    That's a great interview that provides some keen insight into the Detroit situation. Of course, the big money interests want to foist as much as possible onto the workers and retirees while claiming the lion's share of leftovers for themselves -- after their already obscenely profitable scam derivative deals.

    Par for the course.

    "Bob Johnson doesn't have special privileges, because really, why would I entrust that guy with ANYTHING?" - kos, November 9, 2013

    by Bob Johnson on Fri Dec 06, 2013 at 09:19:58 AM PST

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