Why Unions Don't Want Detroit Filing for Bankruptcy

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Dec. 3 (Bloomberg) -- Steve Malanga, a senior fellow at the Manhattan Institute, explains why public unions are trying to keep Detroit from filing fror bankruptcy. He speaks with Adam Johnson and Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The case for detroit's bankruptcy seems like an open and close case.

Lawyers trying to fight the filing.

Steven from the manhattan institute joins us now.

Explain that the role pensions are playing here.

They are trying to separate out the pension funds for the -- from the rest of the bankruptcy.

The rationale is while they do have liabilities, they have money in the trust fund to pay people right now.

They are not insolvent.

Eventually the whole idea is you put all of your liabilities in one place.



They are making the point that we have money in the pension funds am not completely insolvent on the why should you make is party to the filing?

We heard from them a year earlier.

I want to get your thoughts.

-- fromt eh the mayor earlier.

I do not think anyone wanted to go in this direction, but now that we are here, it is important we work together as opposed to continue fighting each other.

What does that mean, work together?

This bankruptcy is different than private sector bankruptcy.

The reason it is different is because a judge cannot really impose a settlement.

It cannot say you are insolvent, and this is what we have to do.

It has to still be negotiated, because otherwise the residence of the city could say you're taking away our democratic rights.

That is what the mayor means.

A judge will put people together to say you have to figure out a solution otherwise the pain will continue for people.

They are in service insolvency.

They are not even delivering basic services.

50% of the street lights are not working.

Policing -- highest crime rate of any city in the country.

We have not even talked about the educational system.

It is a mess.

What happens to the workers dependent on pensions or dependent on pensions in the future?

Cannot be negotiated?

I am not sure what you mean.

-- can that be negotiated?

He has said he wants to renegotiate.

He will not eliminate them -- this is a private company that filed for bankruptcy.


Same situation.

This is why the unions are fighting it.


What is a reasonable expectation for the union?

$.70 on the dollar?

I think reasonable we're talking about maybe 75 cents on the dollar.

By the way, the health care retiree benefits have been reduced already.

If you are a detroit firefighter her work a full 20 years-- hwho worked a full 20 years, you will get somewhere like 40,000. inking you were going to get 100,000. --- thinking you were going to get 100,000. detroit, even without pensions him that they were insolvent.

It has been borrowing money to run day-to-day operations.

What is happening in other places on the chicago a good example.

So many of the pension funds are 25-30% funded.

70% unfunded.

Movies estimates chicago would have to increase property taxes by 100 25%. you cannot do that.

If someone said property taxes are going up 125% -- move.

Who would you sell it to?

What we have in other cities like chicago, they have such big pension debt, that is the thing that may scare people away over time.

Thank you as always for being

This text has been automatically generated. It may not be 100% accurate.


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