Judge Rhodes to Graduates: Lessons learned from the Detroit bankruptcy case

Judge Rhodes to Graduates: Lessons learned from the Detroit bankruptcy case

IMG_2556Judge Steven Rhodes used his 18-minute speech at Walsh College’s commencement to offer graduates a few lessons from history’s biggest municipal bankruptcy case in Detroit. Numbering them one through five, Rhodes translated from the 17-month case five lessons learned, and he explained to the crowd at the Zion Christian Church in Troy how they applied to their post-graduation lives.

Among Rhodes’s advice from the case: Ask for the help that’s out there. Do not be in denial of problems, and get help when you need it. Use teamwork to get the help you need. To get help, give help.

Here is the full audio of his address. The full text of his speech appears below.

Here’s what he said about some hallmarks of the case:

On why bankruptcy happened

“…the city of Detroit got into trouble because people ran the city. People who were not perfect. People who made mistakes. People who took unnecessary risks with the assets and the responsibilities that were entrusted to them.”

On what bankruptcy isIMG_2559

“…people a second chance, a fresh start, to forgive them. That’s of course what bankruptcy is all about. It’s a chance for people who have fallen on hard time or made bad choices to start over. “

On how Detroit’s situation got so bad

“…. It’s simply called “denial.” People who need help deny needing help, and they deny it for too long.”

On the $1.8 billion pension financing deal in 2005

“…that was a bad deal because it involved a financial gamble that the city would never be able to pay off and it was a bad deal because it only delayed the inevitable. If you can’t pay your debts, it doesn’t help just to substitute a new creditor for your old creditor. Worse yet, that deal almost certainly violated state law by evading the city’s legal debt limit and worst of all, the consequence of that deal made the process of resolving Detroit’s problems eight years later when it did file bankruptcy much more challenging and much more expensive. “

On teamwork involved in the case

“…there was teamwork between the city’s professionals in the bankruptcy case and its elected officials and employees. As a direct result of that teamwork, we have a much more feasible, effective and efficient plan to revitalize the city with full buy-in. And so it was that that little teamwork among me and my colleagues led to an important level of teamwork in creating a viable plan for the city of Detroit. Now teamwork does not necessarily mean that everyone agrees on everything all the time. No. In the Detroit case there was serious litigation over big and little issues from the beginning to the end: whether to sell the art at the DIA to pay creditors was probably the biggest issues. But even that litigation was conducted by the professionals in a cooperative, professional way.”

On why creditors agreed to settle

“…Certainly there was a measure of self interest in each of their settlement decisions. Let’s not doubt that. But there was much more to it than that. Much more. A big reason all of this happened is because the mission of the city of Detroit is to help people.”

IMG_2565In summary

“Lesson No. 1 from the Detroit case: We Americas love to give help. Lesson No. 2: Ask for the help that’s out there. Lesson No. 3. Denial is a river in Egypt. Come on, Denial is a river in Egypt. (The audience says it with him.) Get help when you need it. Lesson No. 4: Use teamwork to get the help you need. Lesson No. 5: To get help, give help. It’s who we are. May you get the help that you need to run a straight course up the mountaintop of success in business and may the help that you need never require a trip to my bankruptcy court.”

 

 

Detroit Bankruptcy Judge Steven Rhodes at Walsh College Commencement