Opinion
8:49 am
Tue July 9, 2013

It’s time to plan for what comes after bankruptcy in Detroit

Lessenberry commentary for 7/9/2013

During the last year of World War II, as millions died in history’s most sustained orgy of violence, other men quietly and secretly planned what to do after the war was over. They worked out the details of the division of Germany and the administration of Japan even before those countries had been occupied. Doing that in advance was essential.

Historians agree that was a precondition for Europe’s eventual recovery, and Japan’s rebirth as a prosperous democracy.  This advance planning also went a long way to prevent a new world war breaking out in the rubble of the old.

I mention this because I hope somebody is thinking about what to do when Detroit declares bankruptcy, and even more importantly, when that process is over. Planning how the city will begin the process back to some form of prosperity.

Now I realize that no decision has been made to declare bankruptcy, at least not officially. Officially, Emergency Manager Kevyn Orr is still attempting to reason with the city’s creditors, to persuade them to accept pennies where they are owed dollars.

Tomorrow, he will lead a group of those to whom the city owes money on sort of a blight bus tour, showing them the blasted and devastated streets of Detroit, in an apparent attempt to get them to realize there is no money out of which they can be paid.

My guess, however, is that this is mostly for media consumption. The folks who lent Detroit billions probably didn’t think the place was prosperous when they wrote the checks.

They are not inclined to be benevolent now. They want their money, and if they think they may get more by forcing the city into bankruptcy, that’s what they’re likely to do.

Does anybody remember Borders’ bookstores? They tried to save them too, and the creditors said no. If they wouldn’t save Borders’ do you really think they will spare Detroit?

Yesterday the emergency manager indicated he knows he is running out of time, and added that he expected to know whether bankruptcy will happen within a month. My guess is that he knows it is inevitable now. A spokesman for Ambac Assurance, one insurance company that backs some of Detroit’s bonds, said the company is not happy with Orr’s decision to stop paying them.  

There are indications Ambac and other creditors are gearing up for a major legal fight that, more likely than not, will end up in federal bankruptcy court. What I hope is that Kevyn Orr is thinking a lot about what his strategy will be once the city gets there. How to salvage at least some of the assets the city needs to build a future.

And I hope he has people working on what to do when Detroit emerges from bankruptcy. The city’s plight is sometimes compared to that of General Motors, which went through bankruptcy four years ago. GM came back strong. But the difference is that when it was over, GM had a product that people wanted to buy.

What does Detroit have? My original analogy may be more apt. Like Germany and Japan, Detroit is going to have to invent a new economy. Let’s hope someone comes up with a way to do it.

Jack Lessenberry is Michigan Radio's political analyst.  Views expressed in the essays by Jack Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management, or the station licensee, the University of Michigan.