As Detroit enters Chapter 9 bankruptcy some are considering the possibility of a federal bailout to dull some of the sharper cuts likely to result. Steve Rattner, the former “Car Tzar”, was one of the more prominent names to call for federal intervention in Detroit.
No one likes bailouts or the prospect of rewarding Detroit’s historic fiscal mismanagement. But apart from voting in elections, the 700,000 remaining residents of the Motor City are no more responsible for Detroit’s problems than were the victims of Hurricane Sandy for theirs, and eventually Congress decided to help them.
Detroit Mayor Dave Bing said that he was not ready to formally ask for federal assistance, but that doing so was possible.
Bing said Detroit first needs to develop a plan to invest any money it would receive. He said he would be more specific in the coming weeks about his discussions with the federal government. “I’m not sure exactly what to ask for. I mean, money is going help, no doubt about that, but how much?”
But Michigan Governor Rick Snyder said over the weekend that he did not believe there should be a federal bailout of Detroit and there certainly was not going to be a state one.
Gov. Rick Snyder, R-Mich., said Sunday on “Face the Nation” that granting Detroit a government bailout would be the wrong way to help the bankrupt city. “I do not view that as the right answer,” Snyder told “Face the Nation” host Bob Schieffer when asked whether he would ask the federal government for a bailout. “The right answer is, bankruptcy is there to deal with the debt question.”
A federal bailout would presumably be to help Detroit get rid of some of its debt, maintain its pension scheme, and possibly assist with revitalizing the city. The problem of course is a federal bailout would have to go through Congress and even if a bailout package could find its way through the Senate it would likely be dead on arrival at the House. For now, Detroit is on its own.