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Mich. Gov. Snyder testifies under oath that Detroit bankruptcy was last resort

October 28, 2013 at 12:00 AM EST
Michigan Gov. Rick Snyder took the stand in bankruptcy court to testify about the decision-making process the city went through before filing in order to prove that Detroit is insolvent. Jeffrey Brown gets an update on the city's struggle to right its teetering finances from Christy McDonald of Detroit Public Television.
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GWEN IFILL: Now to Detroit for the latest in the struggle to right the teetering finances of Michigan’s largest city.

A federal judge is hearing arguments over whether the city qualifies for a bankruptcy protection.

Jeffrey Brown gets the latest.

JEFFREY BROWN: The day started with testimony from Kevyn Orr, the city’s emergency manager. Then, for three hours, Michigan Governor Rick Snyder, who appointed Orr, took the stand.

It’s the first time in modern state history a government testified — governor testified in court, and he faced a series of questions from the unions and retirees about whether the state and the city really did all they could do to avoid moving into bankruptcy.

Christy McDonald of Detroit Public Television was in the courtroom today, and joins us now.

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Christy, welcome to you.

But first remind us briefly, the issue in this trial is whether the city can go ahead with its bankruptcy process, right?

 CHRISTY MCDONALD, Detroit Public Television: Right.

It has to prove that it’s insolvent. And that’s what they are seeking for bankruptcy protection right now. But what the opposition wants to know is, did Detroit actually negotiate in good faith before they filed for bankruptcy?

JEFFREY BROWN: All right, so today you heard from Governor Rick Snyder. What were the lawyers opposing him arguing and what was his response?

CHRISTY MCDONALD: Well, Jeffrey, it was far from the typical day at bankruptcy court.

And, as you alluded to, this really underscores the historic nature of what Detroit is going through, when you have a sitting governor taking the stand in bankruptcy court talking for three hours today about the decision-making process and how we actually got to the point when Detroit filed for bankruptcy Chapter 9 protection back in July.

Today, the attorneys were trying to get the governor to talk a little bit about what he thinks should happen with the pensioners and with the creditors at this point. And should they be protected or should those be open to negotiation? They were talking to him about that. And they were also talking about the process that it took for them to declare bankruptcy, if in fact that was his first choice, that that is what he really wanted to do all along.

And the governor said under oath and he has said over the last few months that this was the last resort for Detroit. It’s the last thing that he wanted for the city. But when they finally got to the point where they couldn’t make any deals, that’s what they had to do.

JEFFREY BROWN: And how hard were they pushing him in this very public spectacle? Because, really, pensions has really become certainly one of the things at the heart of this. So how hard were the lawyers pushing the governor today?

CHRISTY MCDONALD: They pushed him. But the governor had been in a deposition before. So there weren’t any real new aspects here. The governor knew what to expect.

And he’s very unflappable. Any time that you have ever had to deal with the governor, he stays on message. He stays on point. He’s very calm. So they didn’t trip him up very much. He knew what to expect. And he didn’t make it very easy for them.

JEFFREY BROWN: Now, earlier today, as we said, you heard from — the judge heard from the emergency manager, Kevyn Orr. Tell us about his testimony.

CHRISTY MCDONALD: Well, Kevyn Orr basically says, if Detroit doesn’t go into bankruptcy, the city is going to fail. It is going to continue to have staggering debt and it’s going to continue to lose population, that this is the answer for the city right now and that they need that protection.

JEFFREY BROWN: What is it — what is it like in court these days, especially on a day like today, when you have got these two very high officials testifying? What is the atmosphere?

CHRISTY MCDONALD: Well, it’s very interesting.

As I said a little bit earlier, you had about 100 protesters outside federal court, chanting, down with bankruptcy, trying to make their voices heard, that they shouldn’t be going through this process. And, inside, it’s very quiet in federal court. They had the main courtroom where people, the public was allowed to come and sit and listen the testimony of the governor.

But it’s interesting. There is also an overflow courtroom, where a lot of the media members sit, where we sit and can do our work on the computers at the same time, and it’s also open to the public. And so there are about 25 people in there, making some crowd noises, I would have to say, every time that the governor said something that they didn’t agree with.

And, again, the people who are against this made the time to come down today and sit and listen to the testimony. They don’t believe that they can solve Detroit’s debt on the backs of the retirees.

JEFFREY BROWN: Now, while all this is happening, you are in the midst of an election for a new mayor. How do these proceedings play into election?

CHRISTY MCDONALD: And that’s the interesting side part of this, Jeffrey, is that, in a week from now, Detroit is going to elect a new mayor.

And both of the candidates say Detroit shouldn’t be in bankruptcy. Both of the candidates say there shouldn’t be an emergency manager that is running the city of Detroit. One of the candidates says, in January, if he takes office, he’s going to go to the governor with his own restructuring plan and ask to be put in place and for them to remove the emergency manager.

So you have a different political situation that is brewing over on this side, and it’s going to be very interesting to see how a new mayor works with the governor and the emergency manager, because the old one right now says he feels that he’s been pushed aside and he has no part in what is going on.

JEFFREY BROWN: Well, explain that for all of us on the outside because it is very confusing. So when a new mayor comes in, will he or she have the power to derail the — he doesn’t have the power to derail the bankruptcy, but can do what?

CHRISTY MCDONALD: He doesn’t have the power to derail the bankruptcy, but he says he wants to — he — either one of them says they want to have more input in the process of restructuring the government and helping Kevyn Orr, who is the emergency manager, do his job.

Now, how much those two men will be able to work together and work with the governor, that remains to be seen.

JEFFREY BROWN: Have you — just in the last minute here, Christy, have you seen attitudes shift very much in the months since the bankruptcy filing happened in terms of the energy or attitudes in the city generally?

CHRISTY MCDONALD: You know, I think people are watching and waiting to see what has happened, because this is unchartered territory for everybody right now.

There’s been a lot of talk about what assets are on the table for the city. There’s also a lot of talk about what this will actually mean in terms of when you get right down to it, the services for the city, for the people who live in Detroit, whether the buses are going to be running on time, whether they have lights in their neighborhood, whether their trash is going to be picked up.

And so people who are not familiar with this process — and let’s face it — we’re all not familiar to it with — with this kind of magnitude coming from this large of a city — it’s going to be interesting to see how it plays out. And people are just now waiting for this designation, if, indeed, the city will be cleared for bankruptcy protection.

JEFFREY BROWN: And, just very briefly, when do we expect that to happen? Any time soon?

CHRISTY MCDONALD: Testimony should wrap up probably this week. We could get a decision from the judge some time next week. We will have to see.

JEFFREY BROWN: Christy McDonald of Detroit Public Television, thanks so much.

CHRISTY MCDONALD: Thanks, Jeffrey.