Detroit Bankrupt: Disaster Decades in the Making

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July 19 (Bloomberg) -- Bloomberg Economics Editor Michael McKee digs deeper into the number behind Detroit's declaration of bankruptcy and looks at what comes next for the city. He speaks on Bloomberg Television's "In The Loop."

That have gotten into financial trouble, this has been decades in the making.

The population is dwindling, but the same square mileage, the largest city in the united states cannot service it all, they do not have the tax base to do it.

Anyone with money has left town.

Add in decades of financial mismanagement and corruption, and you have the events of today.

The numbers are daunting.

Take a look at what they owe right now.

$11.8 billion in unsecured notes to creditors.

About a half billion in terms of other obligations.

$6.4 billion in secured notes.

By 2017, they say they should have a deficit of $1.3 billion, if nothing changes, which means 38 cents of every dollar that they get goes to debt service.

And they cannot raise taxes, they are already at the limit.

The highest taxes in the state for perhaps people with the lowest incomes.

They have pension obligations and benefit obligations, along with the general obligation bonds, as well as what and derivatives that they cannot pay.

This may have to go to court.

Whether or not they pay the general obligation bond will be litigated.

You mentioned it could go as to the supreme court.

Walk us through that process.

They would have to file chapter 9 and then they would offer reorganization to the creditors.

Then they would have to figure out what comes out on the other side.

You mentioned president.

How where is this?

Actually, quite rare.

Since 2010, five cases have been dismissed.

Not all cities allow you to file for chapter 9 bankruptcy, and not all cities can do that, but the idea that this is a whole wave is not true.

This is an isolated event, and it will be president-setting.

They have pension obligations, could those be restructured?

They could, and that has never been done at this scale.

That is one reason why they could end up at the supreme court.

And will be interesting to follow this through of the year.

I want to now bring in a

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