City of Detroit Bankruptcy: Federal Bailout?

On Friday, the City of Detroit submitted an application for Chapter 9 bankruptcy protection.  The largest municipal bankruptcy to date has raised questions about the U.S. Federal government’s response to the troubled local government.  Speculation has been swirling about an auto industry-style bailout.  News reports over the weekend have Detroit Mayor Bing open to the idea of Federal aid, while the Governor of Michigan, Rick Snyder, did not shut down the idea of Federal assistance.  Nevertheless, it is SNWAM’s opinion that direct Federal assistance for the City of Detroit is highly unlikely due to issues surrounding State sovereignty. Indirect assistance through blight removal or community block grants may be a more likely scenario.  Please refer to our most recent “Minute in the Market (MIM),” published on July 19, 2013, for background on Detroit’s bankruptcy petition and its impact on the municipal market.  Full article: City of Detroit Files for Bankruptcy Protection