Detroit: Requiem for a Rust Belt Heavyweight

 

Detroit: Largest Municipal BankruptcySugar pie, honey bunch, say it ain’t so, Motor City, Motown, Detroit …. But it is so. It’s official. The plus-size woman with the large voice has sung. Exeunt Alles. Curtain. The end. And will the last person who leaves the city please turn off the lights – meaning, the lights in those neighborhoods that still have electricity. That’s right. The neighborhoods that have been overrun by wild dogs and feral cats . The music is not Mozart’s Requiem, though it could be, and the sound you didn’t hear was the sound of a city, Detroit, Michigan, USA, a once and future (not) heavyweight contender falling under the weight of its accumulated, accreted, dust covered, water oxygenated rust and untenable debt. On Tuesday, December 3, 2013, a Federal Bankruptcy Court for the 6th Circuit allowed and ordered to go forward the largest municipal bankruptcy in the history of this country.

Bankrupt. The word carries a ton of baggage. Not too many decades ago it was fraught with social stigma, as if one’s bankruptcy were nothing less than a breach of trust in the social contract. People incurred debt, but people paid that debt, and in large part one’s reputation was dependent on timely repayment. Of course back then communities were smaller, more insular, and the creditor and debtor met over a business table (or even a kitchen table) and would break the ice talking about things neighbors tend to have in common. Debtors and creditors knew one another. Lending was personal; and non-payment was very personal.

But times change. Communities expand, grow diverse. Business and commerce grow increasingly complex, the movement of money is like the swells of a great ocean, the notion of debt and compound interest and disregard for words like usury and unqualified buyers, at-risk borrowers, are a constant in the world of high finance. Today it’s rare that the creditor “knows” his debtor. In fact, in the last great recession debtors all over this country learned that one’s first creditor is only that, a first in a long line of nominal creditors, principals who sell the debt to the next guy who then takes on the responsibility of filing all those documents and collecting all that interest – the unspoken hazard in all of it being that the game is like the childhood game of marching to music about a row of chairs, grabbing a seat each time the music stops, removing a seat each time the music starts again. Like most endeavors everybody wanted to be somebody’s first creditor, but nobody wanted to be anybody’s last creditor, and when there were no more creditors to buy up the debt that had been passed down the line so many times as to render the mechanics and paperwork evidencing all of it a paralegal’s nightmare, the chickens (mixing metaphors here) came home to rust – no, roost.

The term rust belt has been around for a while, first gaining some currency in the mid-70’s, about the time Watergate had left the country exhausted, the Arabs had taken a course in pricing, and “stagflation” inspired some policy wonk in the Ford Whitehouse to manufacture round blue pins with the acronym WIN for “Whip inflation now.” The country was uneasy. There were shifts and tides and rolling movements underfoot. Like most eras following on an explosive, self-proclaimed time of Romantic innovation and revolutionary thought, it was a tired time, the time for picking up the mess the revelers from the 60’s had left in their wake. So, while many were slapping their backs for having driven the wicked warlock of the west back to San Clemente, for ending a war (that, truth be told, ended only when the Viet Cong entered Saigon and refugees dropped from helicopters and helicopters dropped from aircraft carriers), and for the Baby Boom’s courageous attempt to prove that hedonism was a viable alternative to America’s latent. always present, sometimes hidden, puritanism, the men who used to make cars, great cars, decided to skip the the assembly line, altogether, to put on some green shades and Gordan Gekko’s hair tonic and embarked on the perilous effort of making money with money. That’s right, car makers stopped making cars and tried to make money instead.

Perhaps the grand masters in Detroit, the CEO’s, corporate management groups and the boards of the Big Three fooled themselves as Americans often fool themselves. Perhaps they believed that there would always be industry, that there would always be a product, that there would always be a market, and that there would always be a profit. Or maybe, because the profits had been so huge for so long, a dazzling display of bounty, plaintiff’s Exhibit 1 in the case for manifest destiny, they forgot that they were in the business of making cars. In effect, auto manufacturers became bankers, and for twenty years and more they turned out the kind of lousy product one might expect when bankers make cars.

General Motors went bankrupt, a notion that would have qualified for insanity status had it been put forward at any time during the 20th Century.  Yes, GM is not Detroit and Detroit is not GM, though it was once said that what was good for GM was good for America. In that case what was good for GM must have been good for Detroit. And the parallels sustain themselves: GM was once the largest. wealthiest, most powerful corporation in the world. Detroit’s bankruptcy is the largest municipal bankruptcy in the history of this country. Obviously somewhere along the line both lost their way, both spent more than they made, both extended the gossamer thread of good faith in proper dealings to the point where one tickle of the web by the commerce-gods who can see through Ponzi schemes and cooked books and the side-deal band aids meant to hide terminal wounds, is sufficient to break the thread, to re-set the scales, to calibrate the loss, finally to cause and distribute the pain of failed payments, failed industry, failed unions, failed management, failed society.

From across Lake Erie one can hear the music of failure. It’s a low grinding sound that peters away to silence. How far Detroit has fallen since the heady days of Motor City, Motown, when it was a heavyweight among heavyweights, with a spirit that struggled to resist the requiems played for those lesser cities back east that had succumbed to the ever encroaching, inexorable advance of rust. Rust, the outward sign of disuse, misuse, abuse and abandonment, signifying the passage of opportunity and the realization that too much in the hands of those too few who rest on their laurels and  forget the responsibilities inherent in wealth is a recipe for stoppage, paralysis and decay. But that’s what happened. And now it’s time to pay the piper.

And doesn’t that raise the most important question of all: Who’s going to pay for the years of abuse and mismanagement that put Detroit in the middle of this fine mess? Will it be the ones who abused and mismanaged the system? The ones who realized years ago that the public coffers, funded by an obedient citizenry, dwarf the bottom lines of most banks and companies, and that if one wants to steal, one must go not only to the place where the money is, but also to the place where the money is most vulnerable to things like theft, scalping, skimming, back room deals, and the back slapping that always accompanies the unlawful transfer of this from here to there?

No! C’mon, this is America, dammit! The powers that be never convict the wrongdoers – especially when the wrongdoers just happen to be the powers that be. Rather it’s the innocent work-a-day Joe and Betty who’ll be called upon to pay up, to bail out, to make it all good, while the media’s encouraged to white wash the whole thing under all those beautiful bankruptcy statutes and words like Renaissance and new beginnings.

That’s right, the innocent pay. With the Court’s allowance of this municipal bankruptcy of a rust belt heavyweight,  the path is now open for the trustees in bankruptcy to settle outstanding claims by raiding and invading pension funds generated by the faithful payments of everyday workers, the people of Detroit, the ones who possessed the spirit, drive and morality to do the right thing, to live right, to fly straight and true, to trust, to try – always to try – in exchange for the promise of those who now feel no need to explain why the money that was there is no longer there.

Detroit is a leading indicator. How Detroit goes, so goes the industrial north. As Detroit goes, so goes other municipalities that have yet to meet the accursed and relentless piper who shows up at the most inopportune times and demands his long awaited payment. Untenable debt drove this heavyweight into bankruptcy in accord with the ever moving westward arc of progress and civilization – indeed, rust never sleeps, nor does it ever fade away. The United States is in debt to the tune of at least sixteen trillion dollars, a figure which is unfathomable. Think on that: the number, sixteen trillion, is literally unfathomable. Just because we have a word for it, in no way means we have any appreciation for the size of it. Just because words like million, billion and trillion get tossed about like so much loose change, the impact is lost on a country that’s trying to print money as a way out of its unfunded obligations. If one listens hard one can hear the tune piped on a penny whistle by a piper with a green eye shade and an HP business calculator. If one listens hard enough one can also hear the hooves of four horsemen. They too have yet to be paid, but they make pipers look like pikers, and, in the end, they always get what’s theirs, they always take what’s due and owing.

 

By Michael Hogan

NY Times

 

 

Leave a Reply

Your email address will not be published.