Detroit’s bankruptcy

By Isaac Cohen*
The decision, adopted by the emergency manager of Detroit Kevin Orr, to request from a federal court that the city be declared in bankruptcy is the largest in the history of the United States.
There have been other cases of municipal bankruptcy dealt with in federal court. The next in size was Jefferson County, Alabama, in 2011, a city of 659,000 inhabitants with an outstanding debt of $4.2 billion. In the state of California, there have been other municipal bankruptcies, such as Orange County in 1994, a city of 2.4 million persons, with a debt of $2.0 billion.
All of these previous cases are far from the Detroit bankruptcy, a city of 701,000 inhabitants, with an estimated debt of between $18-20 billion. More impressive is the fact that, at the turn of the 20th. Century, Detroit was the fourth most populous city in the United States, growing at the vigorous pace of the automobile industry, it reached a peak in 1950 of 1.8 million persons. The decline of the largest urban concentration in the State of Michigan is also closely linked to the sort of the automobile industry. By contrast,, the federal rescue of General Motors and Chrysler, during the Great Recession of 2009, amounted to $80 billion.
Among the creditors of the City of Detroit are 9,700 employees, 20,000 retirees and several institutional and individual holders of municipal bonds.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC Washington Office.