We took some ribbing last summer when we put up a post in this space entitled “The Road to Recovery in Detroit,” predicting that the Motor City would quickly rebound from its financial woes and become a magnet for new industries. A few hours after the pixels for that post were hatched, Detroit announced it had become the largest city in history to file for bankruptcy protection.
So we’re extra pleased to report this week that not only does Detroit stand poised to emerge from bankruptcy before the end of the year–Motown’s recovery is getting turbocharged.
According to reports, JPMorgan Chase, the nation’s largest bank, will provide $100 million to help Detroit with housing repairs, blight removal, job training and economic development projects over the next five years. This comes in the wake of another five-year program, announced by JPMorgan Chase in December, that will provide $250 million to Detroit and other large U.S. cities for job-skills training.
Yes, that JPMorgan Chase, the frivolous “London whale” harpooners who recently agreed to pay the Feds a whopping $13-billion penalty to atone for their shenanigans during the global financial crisis.
“The city’s challenges remain significant—unprecedented, in some regards—but JPMorgan Chase believes that Detroit has the ingredients and intrinsic strengths to reshape and rebuild a dynamic modern economy and make the city a great place to live, work and invest. We are committed to helping make that future a reality,” the bank said, in an internal document acquired by The Detroit Free Press and posted online.
Welcome back from the Dark Side, banksters.
The bank will direct half of the $100 million in loans and grants to community projects. It will give $25 million to groups including the Detroit Land Bank Authority and the Detroit Blight Removal Task Force, which have begun a campaign to demolish most of the city’s estimated 78,000 vacant structures. Other allocations include $12.5 million for workforce training, $7 million for small-business assistance and $5.5 million toward economic growth projects (reportedly including a new streetcar system).
JPMorgan Chase’s investment comes on top of a $300-million commitment last fall from the federal government and a growing infusion of funding from private institutions. Some heavy business hitters also are placing huge wagers on Detroit’s recovery, most prominently Quicken Loans founder Dan Gilbert, a native son of Michigan, who has bought up a huge swath of the city’s downtown and has bold plans for a renaissance of office, residential and retail development.
This vote of confidence on Detroit’s ability to drive out of its deep financial ditch could not come at a better time.
A state-appointed manager has spent the last six months negotiating a painful series of municipal budget adjustments–including deep cuts to city workers’ pensions–to balance Detroit’s books and cope with an estimated $18-billion in long-term debts (the mayor who was serving when the city entered into bankruptcy, Kwame Kilpatrick, recently was sentenced to 28 years in prison after being convicted on federal corruption charges). This summer, a federal judge will decide whether to approve a plan that would allow the city to exit bankruptcy court by mid-October.
The announcement from JPMorgan Chase also bolsters Detroit’s ongoing effort to secure $200 million in funding from Michigan lawmakers. If approved (the Legislature is debating the bills this week), the state funding would be part of a deal that would also include hundreds of millions of dollars from philanthropic foundations, according to a report in The New York Times. A portion of the money would be used to cushion pension cuts for Detroit retirees and avert the sale of the city’s art collection.
We’re not going to waste much space here detailing the depths of Detroit’s collapse. Suffice it to say there are so many abandoned properties in Motown (many of them looking like the aftermath of a WWII bombing raid), the city recently began auctioning off empty houses for a starting bid of $1,000, which is probably less than it takes to secure a 30-year-old Ford Torino in need of a Starsky and Hutch paint job. A recent visit from quirky CNN food tourist Anthony Bourdain revealed that residents have taken over several abandoned city parks and converted them to vegetable gardens.
We prefer to throw our spotlight on the early successes for Detroit’s rebound, detailed in this space last July and in the Michigan Community Profile that will appear in the May/June issue of BF.
The bright spots include Chrysler’s transformation of the city’s last auto assembly plant–the Jeep facility on Jefferson Avenue–into one of the most advanced and productive automotive factories in the world; Gilbert’s ambitious plans for urban revitalization; and the emergence of a new Silicon Alley in downtown Detroit as the automakers’ push to introduce connectivity to their vehicles has drawn scores of software startups to Motown. We’ll continue to keep you posted on the progress in Detroit.
We suspect that the type of “community service” now embraced by JPMorgan Chase may not have been entirely voluntary, but perhaps was required by the government in the fine print of the settlement that imposed the huge federal penalty on the bank. U.S. Attorney General Eric Holder (rhymes with “knows when to fold ’em”) has been widely criticized in the recent past for failing to get even an admission of wrong-doing in exchange for far lesser penalties from banking giants complicit in the global financial meltdown. Let’s hope this is a sign the AG has had a spinal implant.
Nevertheless, while we’d really enjoy seeing Jamie Dimon serving up mashed potatoes at a homeless shelter, we can all agree that dropping $100 mil into Detroit’s recovery kitty is no small potatoes. Kudos to JPMorgan Chase for belatedly remembering we’re all in this together.
Let’s hope this largesse is contagious. Thus far, Goldman Sachs, another member of the financial crisis rogues gallery, has pledged a measly $20 million to Detroit for job creation and economic development. This from an outfit headed by Lloyd Blankfein, who famously whined in the middle of a worldwide financial calamity he helped create that Goldman “is doing God’s work.” (Come to think of it, Blankfein almost rhymes with “takes in vain.”)
We’ll resist the temptation to say we told you so about the bright prospects for Detroit’s rebound. Instead, let’s reach into our stack of vinyl records (what, you prefer 8-track tapes?), pull out a golden oldie and sing along to one of Motown’s greatest hits:
“Ain’t no mountain high enough….”