Detroit city officials spent the weekend defending their decision to file for bankruptcy. Last week, the metropolis became the largest U.S. city to take that step, but a state judge blocked the move.
When a city as large as Detroit fails, it doesn't happen overnight.
Is the bankruptcy filing a good thing for Detroit? Bill Frezza, a Boston based venture capitalist and fellow at the Competitive Enterprise Institute, talks about this and more, on CBN's Newswatch, July 22.
Officials, such as Detroit emergency manager Kevyn Orr, who was hired in March, say the Motor City needs a second chance to restructure and get past a financial crisis 60 years in the making.
"I mean, a lot of this debt, a lot of the practices that I put forward in my June 14 report, that talked about deferrals, unfunded obligations, borrowing, addiction, the debt -- even a level of corruption from 2002 to 2008, which was significant -- have created this problem," Orr told "Fox News Sunday."
He warned then there was a 50/50 chance of a bankruptcy filing. Now that warning is a reality.
"We don't have a choice," he said. "We've crossed the Rubicon on the level -- we have $18 plus billion -- $18 billion to $19 billion in debt and no funding mechanism for it. So, this is a question of necessity."
Public pensions are one of the city's major problems.
Detroit has 18,000 retired public workers who are still owed pension and health benefits. But funding for that program is under by about $3.5 billion.
Gov. Rick Snyder said enough is enough. He said retiree pensions have hampered state and city budgets and it's time for public workers to pay more of their health care costs.
Meanwhile, it turns out Detroit is just the tip of the iceberg when it comes to cities in financial danger. A Pew survey shows that 61 major cities across the nation are in similar circumstances.
The Detroit Free Press pointed out they share a $217 billion shortfall, which comes from unfunded pension and health care liabilities.
It's not clear if any of the troubled cities will take the same step as Detroit. But Detroit Mayor Dave Bing said he hopes their filing for bankruptcy will be a new start.
"Detroit is a very iconic city, worldwide, and our people will fight for this. And we will come back," he vowed.
The mayor doesn't expect much help in the way of bailout money from the federal government. Both Bing and Snyder say Detroit created its money problems and now it's up to them to find a way out.
"I have gotten great support from this administration," Bing said. "I've got great support from a lot of the different departments within the administration. They have been helpful, but now that we've done our bankruptcy filing, I think we've got to take a step back and see what's next."
Meanwhile, the city faces a massive legal fight. Detroit owes about $18 billion to 100,000 creditors and not everyone will get paid.