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 March 04, 2015 08:29 GMT

ECONOMY-THE DAY AHEAD

WASHINGTON (AP) -- The Federal Reserve and the Institute for Supply Management provide a broad look at the U.S. economy today.

The ISM releases its service sector index for February this morning. Its January report showed growth picking up at services firms. The survey covers businesses that employ 90 percent of the American workforce, including retail, construction, health care and financial services companies.

This afternoon, the Fed releases its latest Beige Book. Last month's survey of business conditions showed all 12 of the Fed's regions reporting "modest" or "moderate" growth. It found rising sales of autos and other consumer products, increased factory production and a pickup in tourism in various parts of the country.

FED-YELLEN

WASHINGTON (AP) -- Federal Reserve Chair Janet Yellen says the Federal Reserve has worked hard to correct the mistakes exposed by the 2008 financial crisis.

She says the Fed cannot eliminate the possibility of a future banking crisis. But she says it can make them less likely and less damaging by limiting excessive risk taking and making sure that the nation's biggest banks are better prepared to weather future problems.

She says before the crisis, the Fed focused too much on regulating individual firms and did not pay enough attention to ensuring the stability of the entire financial system.

She says the improvements the Fed has implemented include requiring banks to hold more capital to cushion against losses and testing them annually to see whether they can survive a severe economic downturn.

DEBT LIMIT

WASHINGTON (AP) -- The Congressional Budget Office says Republicans controlling Congress can probably put off a politically wrenching vote to increase the government's borrowing cap until the fall.

That's even though the government can no longer issue Treasury securities after March 15. Instead, the government will rely on tax season surpluses and accounting maneuvers to keep the government afloat through October or November.

The accounting moves include deferring investments into federal employee retirement funds.

Republicans used the need to raise the debt ceiling in 2011 to impose spending cuts upon President Barack Obama. Obama has since refused to negotiate, which drove GOP leaders a year ago to raise the borrowing cap with mostly Democratic votes.

Without congressional action to increase the debt limit, the government would default on U.S. obligations.

INDIA-ECONOMY

NEW DELHI (AP) -- India's central bank unexpectedly cut a key interest rate by a quarter percentage point, the second such cut this year because of lower inflation.

Wednesday's cut brings the policy repo rate, at which commercial banks can borrow from the Reserve Bank of India, to 7.5 percent.

The Reserve Bank of India made a similar cut in the key rate in January.

Inflation in India has lowered substantially as global oil prices have dropped sharply.

The RBI said in a statement that inflation in January was 5.1 percent, well below the government's upper limit of 8 percent for the month.

GAMES-GAME DEVELOPERS CONFERENCE-PROJECT MORPHEUS

SAN FRANCISCO (AP) -- Sony intends on unleashing its virtual-reality headset on consumers next year.

The gaming and electronics giant says its Project Morpheus VR system will debut in early 2016.

The announcement was made Tuesday at a news conference held during the Game Developers Conference.

Sony originally unveiled a prototype of the headset nicknamed Project Morpheus at last year's conference. The headset works in tandem with Sony's PlayStation 4 console and camera by covering users' eyes and simulating virtual worlds on screen.

The company showed off an updated prototype of the headset on Tuesday. It features 5.7-inch OLED screens that display a 100-degree field of view and nine LED lights used to track movement. Sony says the headset can render games at 120 frames per second.

No price was announced.

TARGET-INVESTORS

NEW YORK (AP) -- Target Corp. plans $2 billion in cost cuts over the next two years through corporate restructuring and other improvements.

The goal is to make the Minneapolis-based discounter more agile in an increasingly competitive landscape.

As part of the restructuring plans, the Minneapolis-based company plans to eliminate several thousand positions over two years and establish centralized teams based on specialized expertise.

Target also plans to invest between $2 billion and $2.2 billion in capital expenditures, including a $1 billion investment in technology and supply chain.

The moves unveiled Tuesday are being spearheaded by CEO Brian Cornell, who took over last August and who is charged with reclaiming the retailer's image as a purveyor of cheap chic fashions.

ARGENTINA-DEFAULT

NEW YORK (AP) -- A Citibank lawyer has warned a judge its Argentina branch will be in "great danger" if he refuses to let the South American nation pay interest to bondholders.

Attorney Karen Wagner described the threat to federal court Judge Thomas Griesa during arguments Tuesday in New York.

Wagner says bonds purchased by Citibank customers in Argentina are subject to Argentine law. She says they should not be subject to an order the judge issued banning Argentina from paying interest on bonds exchanged at a discount by 90 percent of bondholders after the republic defaulted on $100 billion in debt in 2001.

The judge says interest can't be paid unless Argentina pays U.S. hedge funds about $1.5 billion they're owed. The judge hasn't ruled.

A lawyer representing Argentina supported Wagner in her arguments.

GREECE-POVERTY BILL

ATHENS, Greece (AP) -- Greece's new left-wing government is promising to spend 200 million euros ($234 million) this year on assistance programs for people pushed into "extreme poverty" by the financial crisis.

In its first bill to parliament Tuesday, the government said it would spend the money on programs to distribute food stamps and provide housing and energy bill assistance.

Greece is struggling to emerge from a six-year recession that saw a dramatic rise in unemployment and poverty, following drastic spending cuts in exchange for bailout loans.

Prime Minister Alexis Tsipras' (TSEE'-prah-zehzs) Syriza (SEER'-ih-zah) party has seen its popularity rise since winning January elections, despite being forced to extend its bailout agreements.

According to an opinion poll for private Star television Tuesday, support for Syriza has risen to 41.3 percent from 36.3 percent in the election.

YELLEN-FINANCIAL DISCLOSURE

WASHINGTON (AP) -- Fed Chair Janet Yellen may have gotten a job promotion last year, but her total assets don't appear to have gotten a bump.

Yellen's financial disclosure form for 2014 shows a net worth of between $4.92 million and $13.37 million.

On the high end of the valuation, that represents a slight decline of about 5 percent from 2013 when her assets were valued as high as $14.1 million.

On the government's financial disclosure forms, officials are only required to put the value of their assets in broad ranges. So it is not clear what caused the small drop in her assets, many of which are held jointly with her husband, Nobel laureate economist George Akerlof.

Yellen in February of last year succeeded Ben Bernanke as head of the central bank.

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