A Detroit Lesson: Washington Post weighs in on what’s next

A Detroit Lesson: Washington Post weighs in on what’s next

Much has been made of the pensions versus art, Detroit creditors versus everyone in the city’s bankruptcy case. The sides are usually predictably drawn.

But this weekend, the Washington Post weighs in with an editorial picked up by newspapers around the country. It recounts, of course, a bit of how the city got to this situation, citing “mismanagement” on several levels. Then, the authors get to the municipal bond-related portion of the story:

Lenders have come to treat tax-backed municipal debt as nearly risk-free, and no doubt Detroit’s bankruptcy experience may cause some to reprice the risk of financing municipal governments, not only in Michigan but also around the country.

That future, WaPo writes, may not “be an entirely bad thing” if the effect is better managed municipalities. Then we get the discipline that seems to have been so badly missing for decades:


Surely banks that took fees to help Detroit fund its pensions with $1.4 billion in dodgy “certificates of participation”deserve to be taught a lesson. 

We’ll see what kind of teacher Bankruptcy Judge Steven Rhodes is later this year.