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English Subtitles

It's the biggest municipal bankruptcy case in US history

Detroit filing for chapter 9 protection

Michigan Gov Rick Snyder, who authorised the filing, was pretty blunt

Detroit's broke

How bad is it?

Well, there's broke and then there's having liabilities for over $18 billion

Detroit's in really bad shape

The city's unemployment rate, at 16%, is more than double the national average

As far as city services, only a third of its ambulance fleet is working

About 40% of the city's street lights don't function

The average wait time for police to respond to calls is 58 minutes

The national average is 11 minutes.

How did things get so bad in Detroit?

People packing up and moving out

In the 1950s, the boom years of the city's auto industry, Detroit had 1.8 million residents

But, developers started building suburbs that lured away residents and businesses

Add in the Auto industry meltdown, and today the city's population is around 700,000

Who stands to lose the most from this bankruptcy?

Detroit city manager says he plans to spread the pain around

But, how that's accomplished isn't up to him entirely

Now what you're talking about is a federal bankruptcy judge deciding who's going to get paid and how much they're going to get paid

Detroit is liable for $9 billion in pensions and other benefits.

It's not clear yet whether, under chapter 9 bankruptcy, those promises to retired workers can be broken, but current workers could see their benefits slashed

Bondholders are also preparing to take a major haircut.

The city's issued 530 million in general obligation bonds

Those are going to pay pennies on the dollar

European banks are bracing for losses on Detroit.

They hold roughly $1 billion of Detroit's unsecured debt.

Will Detroit maintain basic city functions?

The city's manager says 'yes'

Nothing changes from the standpoint of the normal citizens perspective

But he does plan to make some cuts that haven't been revealed yet

How does Detroit's bankruptcy affect other other cities?

It could make it harder for other municipalities to secure debt, raising borrowing costs in Michigan and perhaps nationwide

The bankruptcy procedure is also expected to cost the city hundreds of millions of dollars in legal and financial fees.

Just what Detroit needs

That's the short answer

Introduction

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