No bailout coming for Detroit, treasury secretary says
(CNN) — City employees and pensioners in Detroit shouldn’t hold their breath for a federal bailout of their bankrupt city.
U.S. Treasury Secretary Jack Lew had that message for them Sunday, telling CNN’s “State of the Union” that Detroit’s debt problems were between the city and its creditors.
“Detroit’s got serious financial problems,” Lew told chief political correspondent Candy Crowley. “They’ve been a long time in the making. We stand with Detroit and have been working with them, the technical advice, working with the kinds of normal programs the federal government has to see if there’s anything we can do to help in the Treasury Department.”
And while those “normal programs” may include resources for helping remove blighted buildings and aid to specific communities, it doesn’t mean help paying down the $18 billion Detroit owes in debt.
“I think the issues that Detroit has in terms of problems with its creditors it’s going to have to work out with its creditors,” he said.
It is not a surprise the federal government won’t bail out Detroit. The city’s emergency manager told CNN this month he didn’t ask Washington for help before filing for bankruptcy.
But it could rub some Detroit residents the wrong way. While city workers are likely to see their pensions slashed, auto industry workers there are still receiving full benefits, thanks to the 2008 bailout of General Motors and Chrysler.
The $80 billion in assistance to those firms came in early 2009 after executives begged for federal help, and since the funds came from the Troubled Asset Relief Program, the package didn’t require congressional approval.
A federal bailout of Detroit would require lawmakers to sign on — a feat unlikely in a body mired in debate other financial issues.
On Sunday, Lew also argued a municipal bailout wouldn’t have as widespread an effect on the country as the auto industry assistance did.
“In the middle of the economic crisis, we were saving the American economy,” he said. “We were in free-fall. If we hadn’t taken decisive action, we would have had a massively worse problem than what we even had. So I think the situation in 2009 to 2010 was unique. And it’s something that hopefully we never see again.”
CNNMoney’s Chris Isidore contributed to this report.