News Column

Detroit's Bankruptcy Outpaces All Others

July 30, 2013

Isaac Cohen --

detroit bankrupt

The decision adopted by Kevin Orr, emergency manager of Detroit, to request from a federal court that the city be declared in bankruptcy is the largest in the history of the U.S.

There have been other cases of municipal bankruptcy dealt with in federal court. The next in size was Jefferson County, Ala., in 2011, whose 659,000 inhabitants had an outstanding debt of $4.2 billion. In the state of California, there have been other municipal bankruptcies, such as Orange County in 1994, whose 2.4 million inhabitants owed $2 billion.

All of these previous cases are far from the Detroit bankruptcy, a city of 701,000 inhabitants, with an estimated debt of between $18 billion and $20 billion. More impressive is the fact that, at the turn of the 20th century, Detroit was the fourth most populous city in the U.S., whose growth was driven by the vigorous growth of the automobile industry, and reached a peak in 1950 of 1.8 million persons.

The decline of the largest urban concentration in the state of Michigan is also closely linked to the fate of the U.S. automobile industry. As a point of contrast, the federal rescue of General Motors and Chrysler during the Great Recession of 2009 amounted to $80 billion.

Among the creditors of the City of Detroit are 9,700 employees, 20,000 retirees and institutional and individual holders of municipal bonds.


Isaac Cohen is an international analyst and consultant, a commentator on economic and financial issues for CNN en Espaņol TV and radio, and a former director, UNECLAC Washington Office.


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