The Obama administration has virtually ruled out any federal bailout for Detroit, the debt-ridden Motor City which recently took the unusual step of filing for what has turned out to be the largest municipal bankruptcy in US history.
Treasury Secretary Jack lew, appearing on Sunday talk shows, said Detroit would have to work with its creditors to resolve its insolvency issues. The once-thriving automobile hub owes a staggering $18 billion in debts.
“Detroit’s economic problems have been a long time in developing. We stand with Detroit trying to work through how it approaches these issues," lew told ABC News, but added: “I think when it comes to the questions between Detroit and its creditors, that’s really something that Detroit is going to have to work out with its creditors.”
The only hope that lew held out was in respect of the housing programme, where the Treasury Department has on ongoing scheme to help with housing activity.
The issue of a Detroit bailout has evoked sharply divergent views. While Republican lawmakers are stoutly opposed to any federal bailouts per se at a time when the US is faced with a massive debt load of some $16.7 trillion, the AFl-CIO (American Federation of labor and Congress of Industrial Organizations) wants the federal government to pitch in with assistance, to be matched by the Michigan State government.“Bankruptcy must not be used as a tool to impoverish city of Detroit workers or retirees. City workers have already made severe concessions to keep the city afloat. They are not to blame for Detroit’s financial problems, yet they have been making sacrifices all along the way to help the city out,” said the executive council of AFl-CIO, the nation’s largest labour federation.
But Republican Senator lindsey Graham warned the Obama administration against any attempts to bail out Detroit. Asserting that the federal government itself is broke, Graham is pushing a proposal that would block lawmakers from approving any bailout for Detroit.
“Should the federal government bailout DetroitIJ No way. No how,” Graham remarked, adding: “There is no doubt Detroit has huge problems, but they are facing problems of their own making. Detroit and other municipalities facing these issues need to get their own financial houses in order.”