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Event Summary

The insolvency of a city presents difficult legal, financial, and political issues and conflicts. At an AEI event on Tuesday, five banking experts joined AEI’s Alex Pollock to discuss the conflicts and implications facing the bankrupt city of Detroit. David Skeel of the University of Pennsylvania Law School examined the possibility of bankruptcy restructuring Detroit’s pensions and general-obligation bonds, and the importance of focusing on improving the city’s governance, which brought Detroit to financial collapse.

John Mousseau of Cumberland Advisors discussed the implications of subordinating bondholders’ claims to pension beneficiaries. AEI’s Andrew Biggs explained how the Detroit bankruptcy case greatly differs from other municipal bankruptcy cases in regards to the unchartered territory of different classes of obligations. According to Biggs, the public employee pension funds were mismanaged and marked by conflicts of interest.

AEI’s Richard Geddes highlighted how public-private partnerships might help extract latent value in Detroit’s infrastructure as the city faces diseconomies of scale and rising utility unit costs. AEI’s Michael Barone stated that Detroit effectively lacks a tax base. According to Barone, in 2011 47 percent of property owners did not pay property taxes, which means the city government is incapable of providing basic public services. Panelists agreed that the more than 60 percent population decline is one of the most critical issues facing the city.

–Rahee Jung

Event Description

The city of Detroit represents the biggest municipal bankruptcy in history. Its insolvency presents difficult legal, financial, and political issues and conflicts — notably, the competing claims of public employee pensions and bondholders (including the fate of the city’s great art collection).

What should be done to settle the Detroit insolvency? And how will this historic financial failure affect the market for municipal finance, future municipal bankruptcies, the huge problem of underfunded public pension funds, the city’s battered infrastructure, and the politics of other financially troubled cities?

Our panel of experts in bankruptcy, municipal finance, pensions, infrastructure, and politics will address these and related issues.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

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1:45 PM

2:00 PM
Alex J. Pollock, AEI

2:05 PM
Michael Barone, AEI
Andrew G. Biggs, AEI
R. Richard Geddes, Cornell University and AEI
John Mousseau, Cumberland Advisors
David Skeel, University of Pennsylvania Law School

Alex J. Pollock, AEI

4:00 PM

Event Contact Information

For more information, please contact Emily Rapp at [email protected], 202.419.5212.

Media Contact Information

For media inquiries, please contact [email protected], 202.862.5829.

Speaker Biographies

Michael Barone is senior political analyst for The Washington Examiner and a resident fellow at AEI. He is a contributor to Fox News Channel, author of “Shaping Our Nation: How Surges of Migration Transformed America and Its Politics” (Crown Forum, October 2013), and coauthor of “The Almanac of American Politics.” Over the years, he has written for many publications in the United States and several other countries, including The Economist, the Times Literary Supplement, the Daily Telegraph, and the Sunday Times of London. Barone received the Bradley Prize from the Lynde and Harry Bradley Foundation in 2010, the Barbara Olsen Award from The American Spectator in 2006, and the Carey McWilliams Award from the American Political Science Association in 1992. Barone lives in Washington, DC. He has traveled to all 50 states and all 435 congressional districts. He has also traveled to 54 foreign countries and has reported on recent elections in Great Britain, Italy, Russia, and Mexico.

Andrew G. Biggs is a resident scholar at AEI, where he studies Social Security reform, state and local government pensions, and public sector pay and benefits. Before joining AEI, Biggs was the principal deputy commissioner of the Social Security Administration (SSA), where he oversaw SSA’s policy research efforts. In 2005, as an associate director of the White House National Economic Council, he worked on Social Security reform. In 2001, he joined the staff of the President’s Commission to Strengthen Social Security. He has published widely in academic publications as well as in newspapers such as The New York Times, The Wall Street Journal, and The Washington Post. He has also testified before Congress on numerous occasions. In 2013, the Society of Actuaries appointed Biggs co-vice chair of a blue-ribbon panel focused on underfunding of public-sector pension plans.

R. Richard Geddes is associate professor in the Department of Policy Analysis and Management at Cornell University, director of the Cornell Program in Infrastructure Policy, and a visiting fellow at AEI. He is an expert on private participation in the delivery of infrastructure facilities, and his research focuses on infrastructure funding, financing, and related policy issues. A research fellow of the Mineta Transportation Institute, Geddes is the author of the book “Road to Renewal: Private Investment in U.S. Transportation Infrastructure” (AEI Press, 2011). He was a visiting faculty fellow at Yale Law School during the 1995–96 academic year, a National Fellow at Stanford University from 1999 to 2000, and a commissioner on the National Surface Transportation Policy and Revenue Study Commission. His academic articles have appeared in the American Economic Review, the Journal of Regulatory Economics, the Journal of Legal Studies, and the Journal of Law and Economics, among many others. He teaches courses at Cornell University on infrastructure policy, corporate governance, microeconomics, and the regulation of industry.

John Mousseau joined Cumberland Advisors in 2000, where he is currently executive vice president and director of fixed income, as well as portfolio manager for municipal bond investments. Mousseau and his team manage portfolio construction, management, analysis, trading, and research for both tax-free and taxable bond accounts. He has more than 30 years of investment-management experience. Before joining Cumberland, he was the director of municipal bond investments for Lord Abbett and Co. Previously, he worked for Shearson Lehman Brothers and its predecessor firm, E.F. Hutton & Co. His comments and analyses have appeared in The Bond Buyer, Barron’s, The Wall Street Journal, Bloomberg, Forbes, The New York Times, San Francisco Chronicle, and The Star-Ledger. Additionally, he has appeared on Bloomberg Radio and TV, Reuters, and CNBC for commentary on fixed-income markets. He has also been a speaker at various industry conferences and a guest lecturer at Florida International University. He is a member of the Philadelphia Council for Business Economists, the National Federation of Municipal Analysts the National Association of Business Economics, the Washington Area Money Managers , and the National Economists Club . He is also a member of the New York Society of Securities Analysts, where he served on the Society’s High Net Worth Investors Committee, and is a past chair of the Municipal Bond Buyers Conference. In addition, he has served as an instructor at the New York Institute of Finance and Bond Market Association.

Alex J. Pollock joined AEI in 2004 after 35 years in banking. He was formerly president and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004. He is also the author of numerous articles on financial systems and the organizer of the Living in the Post-Bubble World series of AEI conferences. In 2007, he developed a one-page mortgage form to help borrowers understand their mortgage obligations. At AEI, he focuses on financial policy issues, including housing finance, government-sponsored enterprises, retirement finance, corporate governance, accounting standards, and the banking system. He is the lead director of CME Group, a director of Great Lakes Higher Education Corporation and the International Union for Housing Finance, and chairman of the board of the Great Books Foundation.

David Skeel is the S. Samuel Arsht Professor of Corporate Law at the University of Pennsylvania Law School. He is the author of “The New Financial Deal: Understanding the Dodd-Frank Act and its (Unintended) Consequences” (Wiley, 2011), “Icarus in the Boardroom: The Fundamental Flaws in Corporate America and Where They Came From” (Oxford University Press, 2005), “Debt’s Dominion: A History of Bankruptcy Law in America” (Princeton University Press, 2001), and numerous articles on bankruptcy, corporate law, financial regulation, Christianity and law, and other topics. Skeel has also written commentaries for The New York Times, The Wall Street Journal, Books & Culture, The Weekly Standard, and other publications.

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