The Implications of Chapter 9 Bankruptcy in Detroit

Introduction

Chapter 9 Bankruptcy has many elements within out of which municipalities are one of them. It is certainly a different kind of bankruptcy which is indeed not new but with the recent events people are learning about the implications of Chapter 9 Bankruptcy. A few days back, Detroit, a capital city of Michigan, has turned out o be the largest municipality to file for Chapter 9. This case has grown the involvement of Washington due to Barak Obama's own interest in the event. People from various political and ideological thoughts have shown their concerns since the effect of the municipal insinuation is entirely different from personal bankruptcy. This Chapter 9 has accumulative impact on the whole community and society. According to Root (pp.4-10) the impact is judged against loss of trust, stigmatization, confidence rebuild and an incapability to retrieve the credit out of bad experience. In order to guard or rescue the society from these tragic incidents, it is indeed imperative to establish a fair interpretation of the causes of failure and suggest the correction plan. The federal government should not extend their monetary help in order to 'save' the city; this will tend to establish a negative impression on other cities and will allow their politicians incur mismanagement confidently.

Discussion

Several researches indicate that in general municipalities fail because of mismanaging pensions, little government interventions and incapability or lack of interest of local authorities to make tough decisions. The in-depth knowledge about Chapter 9 imposes that 'fear' is one of the hideous by-products within the applications of Chapter 9 Bankruptcy. However, the worst parts fall on the citizens who are anxiously waiting to be provided with justifiable explanations and measures to help them restore their trust and confidence. According to Martelle (pp.3-25), they need assurance and re-assurance if their savings and investments and taxes are in safe hands. It takes substantial amount of time to rebuild the trust once it has been breached. Barak Obama's intervention is one of the initiatives towards rekindling the trust and confidence of the citizens.

It is out of routine that any city or country files for Chapter 9 bankruptcy and more over it is the second time that the city has filed for it. This compels the federal government to intervene to understand the actual signs causes behind the failure. In the same context, both Democrats and Republicans have communicated their concerns. A Democratic leader, Mayor Rahm Emanuel who has always been concerned about the pensions expansion and union demands, has most recently affirmed that the crisis about pensions is no more the topic of hot debate. This statement indicates to his in-depth understanding that unfunded liabilities can pose greater threats on his municipality. Republican State Representative, Phil Lovas has shown his grave concern about the adverse fiscal effect that had on the state and municipality (Mazie, pp.n.d).

There have been hot debates as to whether Washington should intervene or stay out of eh ...