Treasury Secretary Says There Will Be No Bailout For Detroit

On CNN’s State of the Union show on Sunday, Treasury Secretary Jack Lew was firm in saying that there will be no federal bailout for the city of Detroit, which is going through the largest city bankruptcy in America’s history.

While claiming that the administration “stand[s] by Detroit,” Lew said, “I think the issues Detroit has in terms of problems with its creditors it’s going to have to work out with its creditors.” He said that it has “serious financial problems” that have “been a long time in the making,” and that the federal government will only offer “the kinds of normal programs the federal government has” such as the Treasury Department making funds available to take down blighted properties.

When host Candy Crowley asked why the government offered bailouts for big banks and the auto industry but isn’t offering one here, Lew responded, “I think the situation we had in 2009 and 2010 was unique and something that hopefully we will never see again.”


But experts disagree with Lew on what it will take to rebuild the Motor City. It is “very unlikely that Detroit’s going to be able to pull out of this crisis on its own,” Thomas Sugrue, a professor of History and Sociology at the University of Pennsylvania and the author a book on Detroit, previously told ThinkProgress. The kinds of reforms it will have to make in order to bounce back — becoming smaller, bringing the manufacturing sector back and refocusing on clean energy auto manufacturing, capitalizing on its current infrastructure — will require significant investment, some of which has to come from the federal level, according to experts. Sugrue also noted that previous bankruptcies and near-bankruptcies in American cities prompted the government to bail them out.

And experts argue that Detroit is not in fact unique. One of the major problems afflicting the city is that young people are fleeing in droves to seek out places with better job prospects and weather, leaving it with tons of vacant housing. This is true for the entire region.

The residents of Detroit have already experienced hardship and are bracing for more thanks to the likely bankruptcy proceedings. Under Kevyn Orr, the emergency manager, the city has slashed public services, leaving it with just one-third of its ambulances in service and just 40 percent of streetlights working. The city can’t pay nearly $20 billion in outstanding debts owed mostly to investors and city workers, which means bankruptcy proceedings will determine whether hedge funds or retirees get their money. The city’s general retirement fund is owed over $2 billion, which $1.4 billion owed to its police and firefighters. Orr has already made it clear that these funds will see at least some cuts. Pension benefits are $1,600 per month.