There’s been some heavy breathing about the Detroit bankruptcy trial that opens today. The assumption that the Grand Bargain securing Detroit’s art from sale is at risk comes from the tactics of the bond insurers who have begun to attack the very Federal judges overseeing the process as mediators and sitting on the bench in this trial.
Although there are very real and untested legal issues as stake in Detroit’s bankruptcy, the presiding judge has already signaled his strong preference that solutions not focus on one-time asset sales like the one contemplated with Detroit’s art.
Last week, Syncora leaked an appraisal of Detroit’s art that was twice the previous high mark and ten times the value of the Grand Bargain. Earlier, the firm accused the mediator, Judge Gerald Rosen of being biased in favor of the retirees. That’s not usually the smartest move, as the New York Times explains:
“It’s going from hardball to really hardball,” said David Skeel, a bankruptcy law professor at the University of Pennsylvania. “It sure seems like Syncora has concluded that they will not get what they want either out of the mediator or the bankruptcy judge, and they’re using a scorched-earth policy to see if they can win on some kind of appeal.”
Last week, Judge Rhodes called Syncora’s accusations “manifestly improper and false” and ordered them stricken from the court record.
So whatever happens during this month’s trial, any decision that would result in Detroit being forced to sell art would be far off:
But even after Detroit leaves bankruptcy court, its issues will by no means be over. Legal appeals of the city’s blueprint are likely. The city can expect years of financial oversight from a commission that includes representatives of the state as part of the deal struck to send state money to help spare pension cuts. And the city’s larger questions will still loom: Can it actually begin rebuilding its tax base, financial stability and population, which has fallen below 700,000 and some demographers predict will drop still more?
One Judge to Decide the Future of Detroit (NYTimes.com)