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 May 26, 2015 17:47 GMT

CHARTER-TIME WARNER CABLE

NEW YORK (AP) -- Charter Communications will spend $55.33 billion to acquire Time Warner Cable in a cash-and-stock deal that would instantly create one of the largest pay-television and broadband operators in the U.S.

As part of the agreement, Charter will also buy Bright House Networks for more than $10 billion.

Charter will provide $100 in cash and shares of a new public parent company equal to 0.5409 shares of Charter for each outstanding Time Warner Cable Inc. share. The transaction values each Time Warner Cable share at about $195.71.

The companies on Tuesday valued Time Warner Cable at a total of $78.7 billion.

Shares of Charter Communications Inc. are up more than 3 percent in premarket trading.

DURABLE GOODS

WASHINGTON (AP) -- Orders to U.S. factories for long-lasting manufactured goods fell slightly in April. But orders in a category that indicates business investment posted a second increase, a hopeful sign that this key sector is starting to revive.

The Commerce Department says that total orders for durable goods slipped 0.5 percent from March, when total orders had surged 5.1 percent. The big swing was driven by changes in commercial aircraft, an extremely volatile category that had jumped in March but fell in April.

Orders in the business investment category rose 1 percent in April after a 1.5 percent increase in March. The results followed a sizable 5.1 percent fall in February. Business investment has been hurt by a stronger dollar cutting into exports and cutbacks in the energy industry.

CONSUMER CONFIDENCE

WASHINGTON (AP) -- The Conference Board says consumer confidence rebounded this month as the job market showed signs of improvement.

The business research group's consumer confidence index rose to 95.4 in May from 94.3 in April. The April reading had been sharp drop from March's 101.4.

Consumers' assessment of current economic conditions improved, but their outlook for the next six months slipped. Their expectations for the for the job market improved, however.

Employers added a healthy 223,000 jobs last month, up from a lackluster 85,000 in March. And the unemployment rate slid to 5.4 percent, lowest since May 2008, six months into the Great Recession.

NEW HOME SALES

WASHINGTON (AP) -- More Americans bought new homes in April -- fresh evidence that the improved job market is powering the real estate sector.

The Commerce Department says new-home sales climbed 6.8 percent last month to a seasonally adjusted annual rate of 517,000. Sales recovered from an annual pace of 484,000 in March.

Purchases of new homes are volatile on a monthly basis, although sales during the first four months of 2015 are 23.7 percent higher than in 2014. Employers have added 3.1 million jobs over the past year, with those new paychecks starting to trickle into housing.

Sales increased in the Midwest and South last month, while slumping in the Northeast and West where prices are generally higher.

The median sales price has risen 8.3 percent since April 2014 to $297,300.

HOME PRICES

WASHINGTON (AP) -- U.S. home prices rose at a steady pace in March, pushed higher by a limited supply of houses for sale.

The Standard & Poor's/Case-Shiller 20-city home price index rose 5 percent in March from 12 months earlier. Prices increased at the same pace in February.

Home values are rising at a faster rate than incomes, potentially pricing many would-be buyers out of the market. Yet current increases have moderated from the double-digit gains of late 2013 and early last year.

The biggest increases were in San Francisco and Denver, where prices rose 10.3 percent and 10 percent respectively.

The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The March figures are the latest available.

DEUTSCHE BANK-SEC SETTLEMENT

WASHINGTON (AP) -- Germany's Deutsche Bank AG has agreed to pay $55 million to settle civil charges of filing incorrect reports during the financial crisis that downplayed risks of huge losses.

The U.S. Securities and Exchange Commission announced the settlement Tuesday with the big German bank, which is a prominent institution on Wall Street. Deutsche Bank neither admitted nor denied the allegations but did agree to refrain from future violations of the securities laws.

The SEC said that in some quarterly reports in 2008, Deutsche Bank inflated the value of its transactions designed to hedge against losses on securities in the credit markets, which were turbulent at the time. That created a "gap risk" worth billions of dollars that wasn't properly taken into account in the bank's reports, the agency said.

CHINA-IMF

BEIJING (AP) -- An official of the International Monetary Fund says it believes China's currency is no longer undervalued -- a stance that might help Beijing in its wrangling with Washington over exchange rate controls.

The IMF's first deputy managing director, David Lipton, also said Tuesday that Beijing should work toward having a floating exchange rate in two to three years.

Lipton spoke after meeting Chinese officials to discuss economic and financial policy.

The United States and some other governments have complained for years that China suppresses the value of its currency, the yuan, giving its exporters an unfair price advantage and hurting their foreign competitors.

Referring to the yuan, Lipton said that after recent changes in global exchange rates, "We believe that it is no longer undervalued."

BRITAIN-LIBOR

LONDON (AP) -- A British prosecutor says a former Citibank and UBS trader motivated by greed served as the ringmaster in the alleged manipulation of a key interest rate, the London Interbank Lending Rate, or Libor.

The charges against trader Tom Hayes, who specialized in products pegged to yen-denominated Libor, relate to the period from August 2006 to September 2010. He is charged with conspiring with employees from other leading institutions.

Prosecutor Mukul Chawla says the 35-year-old Hayes' greed "led to his dishonesty on an enormous scale."

Libor is a key rate that banks use to borrow from each other. Indirectly, the rate affects what people pay when they take out loans, such as a car loan.

Hayes denies all eight charges in the case that opened Tuesday at Southwark Crown Court.

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