The media has painted the bankruptcy of Detroit as a case of the evil rich versus the defenseless, poor citizens and retirees. This, along with its historical nature, is how the situation has been packaged to attract viewers and readers.
Detroit’s creditors should not be vilified for fighting for a bigger share of the bankruptcy settlement.
The prevailing theme of this portrayal is that the corporate creditors should be forced to sacrifice more because of their wealth. Where I disagree with this theme is that we do not believe in discrimination in our legal system.
We decided, over the course of our nation’s history, that the legal system should not treat people different based on their race, gender, education level…or wealth. We embraced the ideal that the rich should not be given special favor in our legal system, and that the system should not look down on those with less wealth.
How would you feel if a news outlet ran a story saying that retirees should get a smaller percentage of what they are owed because the city owes them less money?
What if the court said each retiree’s pension is so small (compared to the total amount of debt) that the court would not bother considering it, and erased the pension liability?
Most people would say it is unfair, and find it horrible that the courts could care so little about the plight of the average person. They would rail against the obvious discrimination against the retirees, and say that we should not treat money owed to a rich person as more important because they are rich, or because the number is bigger.
We should think the same when it comes to corporations and the rich. They do not have less of a right to their money because they have more of it.
Aside from the value of property rights: Businesses exist to make money for their shareholders in the same way that the public worker’s unions have protected their members’ interests during this process. Neither party exists to work for the best interest of the others.
Do not get me wrong: All parties in this dispute will lose money, no matter which side wins. It is my sense that Detroit will exit bankruptcy with reduced debt, and pensions and other creditors will all come away with cents on the dollar.
Further, I am not trying to justify all of these creditors’ actions. Most of the corporate creditors should have known the risks of investing in a city on the brink of financial disaster. They also should have been even more concerned by the tactics used by the city to continue borrowing money, as described in James Tatum’s Sept. 14 column.
But it takes two parties (at least) to make a bad deal. The city’s elected leaders have been borrowing money for decades and finding ways to keep the game going just a little longer.
While I do hope for Detroit to prevail and begin a swift recovery, I do not think we should be angry with the creditors for trying to get the most money back they can.
