The fate of Detroit

Updated: Saturday, August 3, 2013
The fate of Detroit story image
KALAMAZOO, Mich. (NEWSCHANNEL 3) - On Wednesday, one week after it declared itself bankruptcy, the City of Detroit celebrated its 312th birthday.

Tonight, in Tom's Corner, Tom Van Howe says Detroit's troubles, decades in the making, are only just beginning.

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I'd like to be a rah-rah guy for our state's largest city. But the truth is, no matter how I twist it and turn it and shape it...I Just can't.

The City of Detroit is the result of a train-wreck 50 years in the making. We all watched it happen, one slow-motion, hair-raising leg at a time.

How many times have you seen someone shake his head and say, helplessly, "well...that's Detroit."

And there are so many things to blame it on. Blame it on incompetent or corrupt leadership. Blame it on an auto industry that seemed unable to compete with the rest of the world. Blame it on unfunded pensions.

Blame it on NAFTA that did take hundreds of thousands of jobs south. Blame it on OSHA, which required companies to spend millions to make workplaces safer. Blame it on the cost of oil from the Persian Gulf. Blame it on white flight.

Blame it on loss of tax revenue.

Blame it on what or whomever you please.

The fact is, Detroit is a gigantic mess. It is a failed city.

In 1960 it was the fifth largest, and richest, per capita, city in the country with a population of nearly two million.

Now, with a population of just 700-thousand, 60 percent of its children live in poverty. Unemployment plods along at nearly 20 percent.

Some 30-thousand current and retired city workers are wondering if they'll have any of the pension they helped pay for.

A full third of Detroit's 140-square miles—an area the size of Grand Rapids—is now vacant or desolate.

It's a city that finds it difficult to even maintain street lights.

In the city itself, there is anger and outrage at the predicament people are finding themselves in...as if they believed the city could go on borrowing and running up bills that it never intended to pay. That day is now over.

I thought the defiant column by Mitch Albom, the celebrated Free Press writer, was terrific.

"Yeah, we're broke," he wrote, "But we got up this morning and had breakfast. Yeah we're broke. But we'll carry on...We'll still be here. We're not going anywhere."

It's nice and its easy to be defiant. But its not going to pay any bills. Its not going to bring back people who've already left. It's not going to raise tax revenues. Its not going to make leaders anymore honest.

For the record...Stockton, California, declared bankruptcy 13 months ago. And its parks are reportedly populated with drug dealers, its courts with lawsuits, its business districts with boarded up windows—with little relief in sight.

Are there positive signs in Detroit? Yes.

The Tigers are in first place. Consumer Reports says the new Chevy Malibu is hands down the best car on the road in just about any price range. Private developers want to build a new soccer stadium downtown. The state has agreed to issue $450 million in bonds to help develop a new Red Wings hockey stadium—and $200 million more to help develop 45 blocks near downtown.

So yeah...some things have the patina of progress.

But bright spots aren't enough.  Detroit is in for a long painful recovery. If, in fact, its up for it. There will be no bailouts.

We know that now.

So, in a very real way, Detroit is a new frontier—an urban frontier—waiting for courageous and creative private investment to mold something new from the rubble.

We have our fingers crossed. In the meantime...Happy birthday.

In this corner...I'm Tom Van Howe.

Business News

Last Update on August 21, 2014 07:34 GMT

WORLD MARKETS

SEOUL, South Korea (AP) -- Asian stock markets were dampened by a weak China manufacturing survey Thursday. But Japan gained on the prospect of a stronger dollar after Fed minutes showed policymakers are leaning toward their first rate hike since the 2008 financial crisis.

Japan's Nikkei 225 rose 0.8 percent to 15,575.82 and Australia's S&P/ASX 200 added 0.2 percent to 5,645.70. South Korea's Kospi sank 1.2 percent to 2,047.77 and Hong Kong's Hang Seng fell 0.9 percent to 24,948.59. China's Shanghai Composite was down 0.7 percent to 2,225.44.

ECONOMY-THE DAY AHEAD

WASHINGTON (AP) -- The Labor Department today will report on the number of people who applied for unemployment benefits last week. In the previous week, more people applied for benefits, though the figure remained near pre-recession levels.

The Conference Board will issue its index of leading economic indicators for July. In June, the index, which is designed to predict the economy's future health, increased for a fifth straight month.

The National Association of Realtors will report on existing-home sales in July. In June, sales rose for a third straight month, lifting the figure to the highest level in eight months.

Freddie Mac reports on average U.S. mortgage rates for this week. Last week, the average for the 30-year loan slipped to 4.12 percent from 4.14 percent the previous week.

Also today, two big retailers report their quarterly financial results. Sears reports before the market opens. Gap reports after the closing bell.

CHINA-MANUFACTURING

HONG KONG (AP) -- A survey says Chinese factory activity expanded in August at a slower rate, suggesting the recovery in the world's No. 2 economy is losing momentum.

The HSBC preliminary purchasing managers' index fell to a three-month low of 50.3 from 51.7 in July.

The index is based on a 100-point scale on which numbers below 50 indicate contraction.

China's economy had been showing signs of revival after a slowdown, with growth edging higher to 7.5 percent in the April-June quarter. But the report on the country's vast manufacturing industry shows the recovery is uneven.

Communist leaders in Beijing have already unveiled small-scale stimulus to bolster growth. HSBC economists said "more policy support is needed to consolidate the recovery."

The final version of the survey is due Sep. 1.

BANK OF AMERICA-SETTLEMENT

WASHINGTON (AP) -- Officials directly familiar with intense private negotiations have told The Associated Press that Bank of America has reached a record settlement of nearly $17 billion with the government. The aim is to resolve a federal investigation into the bank's role in the sale of mortgage-backed securities before the 2008 financial crisis.

One of the officials, who spoke with The Associated Press said the bank will pay $9.65 billion in cash and provide consumer relief valued at $7 billion. The official spoke on grounds of anonymity because the settlement was not scheduled to be announced until Thursday at the earliest.

The deal is the largest settlement arising from the economic meltdown in which millions of Americans lost their homes to foreclosure. It follows agreements in the last year with Citigroup for $7 billion and with JPMorgan Chase & Co. for $13 billion.

Like the Bank of America deal, those settlements were a mixture of hard cash and "credits" for various forms of consumer aid that the banks promised to provide in coming years.

BERKSHIRE HATHAWAY-SETTLEMENT

OMAHA, Neb. (AP) -- Warren Buffett's company has agreed to an $896,000 penalty for failing to give advance notice to l regulators about a December 2013 investment in wallboard maker USG Corp.

The Federal Trade Commission said Wednesday that Berkshire Hathaway Inc. should have notified the Justice Department before it converted $325 million of senior USG notes it held into 21.4 million shares of the company.

Because Berkshire was already a significant USG shareholder, antitrust laws required it to notify regulators because of the size of the deal. At the end of June, Berkshire held just over 39 million USG shares.

Berkshire did correct its initial filing after the USG investment and clarify that it should have notified officials. But regulators said Berkshire made a similar mistake six months earlier.

COAL ASH

RALEIGH, N.C. (AP) -- North Carolina lawmakers have approved legislation they say makes the state the nation's first to address decades of toxic water pollution from residue left behind by coal-burning electricity plants.

The General Assembly on Wednesday approved legislation addressing the problem unmasked six months ago when a coal ash spill from a Duke Energy plant coated 70 miles of the Dan River in gray sludge. The measure goes to Gov. Pat McCrory before becoming law.

Environmentalists say the legislation improved on earlier efforts, but didn't go far enough.

Lawmakers say the measure would reverse a Superior Court judge's ruling that Duke must take "immediate action" to eliminate groundwater contamination that crosses onto a neighboring property.

Environmental attorney Frank Holleman says that will allow Duke to study the problem indefinitely before starting cleanup.

UPS-DATA BREACH

ATLANTA (AP) -- Some customers of The UPS Store may have had their credit and debit card information exposed by a computer virus found on systems at 51 stores in 24 states.

A spokeswoman for UPS says the information includes names, card numbers and postal and email addresses from about 100,000 transactions between Jan. 20 and Aug. 11.

United Parcel Service Inc. said Wednesday that it was among U.S. retailers who got a Department of Homeland Security bulletin about the malware on July 31. The malware is not identified by current anti-virus software.

Spokeswoman Chelsea Lee says the company isn't aware of any fraud related to the attack.

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