Detroit financial crisis continues

By on July 18, 2012

Detroit — If a legal challenge to the so-called “Financial Stability Agreement” is not dropped by Detroit’s Law Department, the State Treasurer’s Office says it will withhold $28 million in revenue-sharing funds and give them directly to Bank of America, a trustee of public monies earmarked for this distressed municipality. (Detroit News, June 29)

The FSA was passed by City Council by a 5-4 majority in April. The agreement has no legal basis and is merely designed to ensure that the banks are paid and that Detroit residents are muzzled in their opposition to the corporate takeover of the city.

Bank of America is the second largest holder of municipal debt in the United States. It is second only to JPMorgan Chase. Both financial institutions — along with other banks — have devastated Detroit and other U.S. cities by deliberately targeting oppressed communities for predatory lending, resulting in millions of foreclosures and a precipitous drop in tax revenues.

Rating agencies have lowered Detroit’s bonds to junk status, making it even more expensive to borrow money and to repay existing loans. A state-appointed “Financial Review Panel” indicated that Detroit debt obligations were more than $16 billion and rising.

For the 2010 fiscal year, Detroit paid $597 million in debt service to the banks, driving this majority African-American municipality into financial ruin and leaving the local government with almost no resources to pay workers’ wages and maintain services. The City Council passed a budget in June which called for $250 million in budget reductions. This could bring about the layoff of 2,500 city workers and further erode basic services such as fire, public lighting and transportation.

A scapegoat for more looting by banks

City of Detroit Corporation Counsel Krystal Crittendon filed a lawsuit in June requesting a declaratory judgment on the FSA’s legality.

The state of Michigan owes Detroit more than $224 million in revenue sharing as well as monies for a failed land deal at the state fairgrounds and unpaid municipal citations.

The lawsuit challenged the state’s ability to place the city under supervision based upon hundreds of millions of dollars being owed and because the FSA is not based on any existing law mandating the state to impose emergency management if cities are under financial distress. Detroit’s charter provides the authority to the Law Department to pursue debts owed to the municipality. City Council members can request such legal action.

Judge William Collette in Ingham County Circuit Court dismissed the lawsuit in June before even permitting the substance of the arguments to be presented during a scheduled hearing. Corporate-backed mayor, Dave Bing, hired a million-dollar law firm to file a motion for dismissal against a case filed by the city’s own chief lawyer.

Bing sought to have Crittendon fired, but the city charter requires the approval of six City Council members to do so. When Bing requested the City Council vote on Crittendon’s dismissal on June 22, he walked out of the meeting when there was no support for such a move.

Although the corporate media are using the Corporation Counsel as a punching bag, the real issue is whether Detroit residents have a right to determine their own political destiny. The appointment of a putative “Financial Advisory Board” gives these capitalist agents control over the city’s economic direction. They will work to squeeze whatever resources they can out of Detroit, which has one of the highest unemployment and poverty rates in the country.

Exposing the banks’ role here, mlive.com reported on June 29: “The state is expected to wire one of those payments — a $28.5 million sum — to the trustee later today. While the trustee is legally obligated to send those funds to the bondholder, [Michigan Treasurer Andy] Dillon said the state is working with Bank of America on a deadline extension that would ensure the city receives those funds.” “Trustee” and “bondholder” are terms for banks in this case.

Dillon said: “This is not the state’s decision. This is a contractual arrangement that has been set out. We’ll send the money out and the trustee will decide what to do.”

Call for moratorium on debt service

The Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shut-offs has been waging a campaign against the banks and home foreclosures for more than four years. In recent months, the coalition has demanded that the city refuse to pay debt service, halt layoffs, stop eliminating programs that service the working class and poor, and end the evisceration of municipal services.

Raising the demand for a moratorium on debt service, the coalition held demonstrations in the financial district in May and June, and protested at public meetings held by the City Council and one organized by Bing on June 27.

The coalition is planning further actions aimed at shedding light on the real culprits behind the city’s economic crisis. The crisis in Detroit is taking place amid the bankruptcy filings in Stockton, Calif., and financial problems in many U.S. cities, including Harrisburg, Pa.; Birmingham, Ala.; and Providence, R.I.

The U.S. capitalist crisis is being passed down to the states, who in turn are imposing austerity on cities and suburbs through large-scale cutbacks in public spending. This has resulted in the elimination of hundreds of thousands of jobs in public service and education. Since the economic crisis began in 2007-2008, about 600,000 to 800,000 public sector jobs have been lost in the U.S.

The federal, state, county and municipal governments are bailing out the banks by paying debt service and interest to banks and corporations, while workers and the poor are paying the price.

In Detroit and other Michigan cities with majority African-American populations, the issue of self-determination is a major focus, since these brutal efforts to cut budgets and impose financial dictatorships violate civil rights and voting rights gains, which were won through decades of struggle against racism and national oppression.

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