Showing posts with label Detroit. Show all posts
Showing posts with label Detroit. Show all posts

Wednesday, July 24, 2013

Bankruptcy Up Closer

I’d like to draw attention to a post on Market Size Blog, maintained by Editorial Code and Data, Inc. Here is the link. It shows what happens to housing prices when a rather monumental shift in population takes place—as it has taken place in Detroit. In a recent op ed column (NYT, July 22), “Detroit, the New Greece,” Paul Krugman examines that comparison and comes to the conclusion that the two are not comparable—although they are likely to be linked. The referenced blog post shows at least one of the reasons for the Detroit bankruptcy: a vast population exodus. The city had 1.029 million people in 1990, 701,500 in 2012.

Tuesday, July 9, 2013

Caveat Emptor

My subject is the impending bankruptcy of the City of Detroit—and the anxieties that in that process such institutions as the Coleman A. Young International Airport, Belle Isle Park, an island in the Detroit river, and the holdings of the Detroit Institute of Arts (DIA) might be auctioned off to satisfy Detroit’s bondholders and other creditors.

The dominant impression that arose in my mind while reading an article about this in the New York Times (our distressed city is now national news) concerned the very strange disconnect between ultimate buyers of municipal bonds and the condition of the entities whose bonds they buy. Let me spell that out more. We hold municipal bonds. But to tell you the truth, we’ve no real idea just how financially solvent are the cities whose bonds we own. Why this ignorance? Well, we rely on an intermediary, in our case Merrill Lynch, in general the financial industry. If we trace the slow deterioration of Detroit’s financial standing, it is obvious that shoddy goods were sold, in massive quantities, by our financial sector to all kinds of people—that bond rating firms must have failed to give the right signals, or loudly enough, years and years ago. A decade ago already, Detroit should have found it impossible to sell any bonds—if our financial system practiced, on behalf of its customers, that old Roman warning: Caveat emptor.

The feedback systems aren’t working. It benefits the financial sector to sell bonds, good or bad. If the transactions are large enough, government will eventually bail out the banks, investment type or otherwise. The Great Recession was the direct result of major financial giants’ actions, their selling questionable instruments with a caveat emptor and a wink, but the wink only visible to their insiders.

Now it strikes me that selling off the airport, Belle Isle, or the arts held by the DIA is illegitimate. The bondholders need to be asked: “Do you own airport bonds? No? Do you own Belle Isle real estate? No? Do you hold DIA bonds? You don’t? Well, in that case, you cannot have these things. What you own are Detroit municipal bonds. You shouldn’t have bought them in the first place. Then Detroit would have had to cope, years ago, before the debt accumulated to an $18 billion mountain.”

The debt should be cancelled. Bond sellers bought them knowingly—even if they resold them later to the stupidly innocent. Let those who hold the debt pay for their failure of due diligence. And leave what belongs to the public to the public.

Sunday, December 13, 2009

The Inconstancy of Fortune

The Wayne Country Treasurer once more issued a paid supplement to the Detroit Free Press advertising listings of forfeited properties subject to foreclosure. The supplement runs to 127 pages. I sampled some pages, counted the listings, and the extended that count to the entire publication. Thus I conclude that the county wishes to seize something like 26,400 properties because their owners, listed with every posting, have failed to pay taxes.

Everything leaves its paper trail in modern culture. Those of us who, sometimes—perhaps because visitors want to see the devastation they’ve heard about in the news—engage on hour-long drives into the abandoned wastes of the City of Detroit thus could, if we wished, thanks to the labors of our county treasurer, actually identify the people who once inhabited homes through the broken roofs of which now strong trees are growing. In summer the structures are sometimes quite hidden by the obscuring foliage.

This reminded me of an essay in my The Portable Renaissance Reader, written by Poggio Bracciolini in 1430 and titled “The Ruins of Rome.” Goes around comes around. Bracciolini, in company of his friend, Antonio Lusco, ride out and mount the Capitoline hill. From there, dismounting, they survey a scene of Rome in ruins and meditate about the inconstancy of fortune. Curiously the chapter of my Portable Reader in which this essay is reproduced is titled “Learning of the Best Sort.” I find that apt today. Because in some ways it is instructive to contemplate the movements of the great water-wheel of time. It descends into the depth empty but rises again at right repeating rotations carrying the living waters to disgorge them into channels. At times we see the water, at times the emptiness. And to see both is to learn something meaningful.

The mood of reading Dante is still present for me. And reading the Divine Comedy strongly reminded me that the extreme compressions that produce words like “The Renaissance” hide the reality beneath temporary glows of light or gathering darkness that different eras manage to produce. Dante’s times, seen from the ground, as he saw them, were not that different from ours. And he wrote at a time  roughly 130 years or so before Bracciolini sorrowed over Rome. I wonder what Rome looked like in Dante’s days. Not much better, I don’t suppose. The balance of good and evil in every time is much the same.