tv France 24 News PBS July 24, 2013 5:00pm-5:31pm PDT
>> the latest life in the newsroom. officials say at least 40 people have been killed in a train crash in spain. the train derailed in santiago de compostela. egypt's military calls for mass protests on the streets. muslim brotherhood continues its demonstrations. the uncertainty goes on. in damascus, the u.n. tries to get access to investigate allegations of the use of chemical weapons. or have been claims from both sides. -- there have been claims from both sides. pope francis fever continues in brazil. the leader of the catholic
church urges a packed crowd to turn away from money and pleasure to help build a better world. britain's royal baby will be called george alexander louis. those are the main stories. stay with us. >> welcome back. this is that "france 24" debate. we are looking at detroit's bankruptcy filing and whether it is contagious. with us is a bankruptcy attorney.
also with us from the world bank, oliver griffin, welcome back. we would also like to welcome james. how are you, sir? detroit in the news, and there is a lot of fodder out there. >> a lot of interesting facts, disturbing facts, but also some positive vibes. let's take a look at some of what we are finding online. 15 houses in detroit, you can buy for less than $500. that is a sign of the times.
>> i believe they call those a handyman special. >> i am not sure if it is a good deal or not, but it is indicative of the way things are. $70 for that house there. plenty of examples. that house for $100. it is pretty extraordinary. it shows the way the city has been affected. it shrank in its population from 1.8 million to 700,000. that is another example also. this is a science lab in an abandoned school in detroit. i was going to get to the positive stuff, but i am not there just yet. this is another photo shared on social media.
to show how it has been politicized, if it had been run by the republicans, the auto industry -- detroit celebrates 312 birthday on wednesday. founded by a french man. some other tweets on that as well. happy birthday, detroit. there were some positive vibes. some people using the fact to send out some positive -- >> i want to asked at this point, there has been a lot of talk. when you see stories -- there is something a little bit too glib about discussing you can buy for under $500.
some people in detroit may be annoyed from some of the attention. >> you cannot deny the reality. we have a lot of abandoned houses which really need to be demolished. they are sites for crime, which is a big problem in the city. the leave it or not, there is some development -- believe it or not, there is some development and the activity going on in the midtown and downtown areas. not everything is negative. >> it has sent shockwaves around the world. you have an example of that in this interactive map. the 50 cities in france that are most indebted. there -- attention has been put on that issue of indebtedness at the municipal level. the top city is in the paris suburbs. >> it shows the level of
indebtedness per capita -- you have good debt, you have bad debt, cannes is a wealthy city, but it is indebted. >> we did the math on detroit. when we look at that interactive map that james is showing, we did the math on detroit. we saw it was $18.5 billion for a population of 700 and thousand -- 700,000. is it easy to mop that up? >> it will be the haircut. that is where the bankruptcy will serve to do. it is not easy to mop that up,
you need a long-term plan. it can be done. in the united states, you have that kind of flexibility. >> a couple of editorials before i leave you. there is a piece from the new york times comparing detroit to greece. the greek economy is 1.5 the size of metropolitan detroit. he is cautioning against the reaction that took place after the fiscal crisis in greece. some politicians made it into a debate about fiscal rectitude as opposed to job creation. we can still learn from the way the people reacted. let the discussion get hijacked to make it into a fiscal
deficit/austerity debate when it should be about growing the economy. this is in the guardian. capitalism has many successes, but this is a failure of capitalism. the auto industry -- the shareholders of the three big auto companies. the city was guided as a result. -- gutted as a result. >> wednesday, we are getting news in nearby dearborn, michigan, the ford motor company announcing earnings jumping in north america on strong pickup truck sales. also growing in asia. that is one of the issues that
was talked about. an area that relies a little too much on one industry. >> absolutely. countries that are doing well in terms of gdp are diversified because they can rebound. everybody has heard of tesla, the new electric car manufacturer. it is being produced, not in detroit, which was the booming auto city in the beginning of the 20th century. tesla is made in california. at the beginning of the 20th century, detroit was the kind of silicon valley of cars. somehow, detroit is a victim of its own efficiency. ford, gm, chrysler are efficient. efficiency in scale, the small, vibrant, entrepreneurial spirit is dying because they cannot --
>> the new upstarts, who will be the big layers of tomorrow, or elsewhere. -- the big big players of tomorrow, or elsewhere. >> and industry needs innovation. when it is mature and you have too many large big players invading his space. -- invading the space. electric car innovation, the big three have not been able to compete as well as tesla, which is a small start up company. it is interesting, in the u.s. press, there was a debate. whether silicon valley could experience the same fate as detroit. >> california is the most indebted state in the u.s.
>> california managed to pull itself out of its debt problems. >> it is interesting the way they did it. they convince the voters to say yes to raising taxes. >> the solution is always, it is the same recipe. you increase taxes, etc. the biggest impact in terms of capping innovation. >> which is the next debt bomb, the next subprime policy -- crisis, which is very bad policy. >> let's look at france.
the idea is -- >> let's pick up on that point. >> it is not correct to say what to greece means is mismanage it. it is correct to say that greece is a victim of speculative attack. attack. he financial sector is a tremendous amount of stress because of the losses. >> looks -- let's look at that stress. we talked about contagion.pnonee near the size of detroit, michigan. but other big cities are in trouble. an editorial entitled "who's next?" unions and creditors help to perpetuate a spend cycle.
the party is over, as it also might be for other cities. california, philadelphia, and chicago. rahm emanuel announced layoffs in the public school. already, we see the potential for a snowball effect. doug bernstein is a bankruptcy lawyer. do you see your focus shifting from the private to the public sector? >> it is certainly possible. my practice is representing banks with troubled credit. i have been busy for several years and the united states. >> you will be busy for a long time. hopefully. >> yes and no. my business thrives on people's misery. >> banks are not people.
>> well, but there are business owners wh do suffer. when the banks come calling to collect their money, it is a problem. >> that is where the state [inaudible] what you are saying about contagion, there is a terror going on. the banks are saying, implement austerity policies. if not, we will come after you. when you say that rahm emanuel is laying off tens of thousands of people == >> 2100 from the public schools. >> it is very bad policy because the only way you can create jobs is by putting money into people. >> the problem in the u.s. system is that you can cut and slash in many sectors, but you
are not allowed to touch the pension fund. >> that is one of the issues at the hearing tomorrow. that is one of the points made by the banks and the hearing tomorrow -- >> it will not happen. >> you are talking about a $16 trillion economy and the bankruptcy. it is definitely serious and it is unfortunate for the people -- this parallel to greece is not a good comparison. >> you have about 4000 billion dollars. they considered safe basements for investors.
they are backed by tax revenues. the cost of issuing bonds in the u.s. will go up. >> in terms of size, it may be different, but the idea of getting out of the crisis by investing in r&d and innovation. we have to understand, the car industry, california was more pushy on innovation and now it is one of the best ways -- in every crisis there is an opportunity. i do not think the u.s. will let down its people. >> you have to choose between the banks and people. we cannot go on paying and paying for the banks. they are putting pressure on
industry and people. it is exactly what happened in greece. they are trying to get their money back. when you play poker, you lose your stack, and you're trying to get it back. >> $1.5 billion in bonds packaged for the city of detroit. they were sold to other european banks. a german one, ralph atkins writing -- this is an important point. back in 2009, detroit expected to receive revenue from three can see notes -- casinos in the city. the banks could block the crucial flow of money to the
city's government. doug bernstein, was their money for the casinos that went directly to the banks? >> that was the basis of a lawsuit that was filed about three weeks ago. those monies were trying to be diverted by the creditor. the casino revenue had been pledged. >> what do you think about that? is it legal to do that? take what is tax revenue coming from a casino and giving it directly to a bank? >> that is how badly the city has leveraged its assets. they were looking to borrow every way possible and that is the only way he could get credit. >> does it seem legal to you? >> it is legal. >> the legal structure of your
bonds. it is interesting to see in france, you have a change in the writings of bonds. you have collective action clauses in the eurozone. that means we are preparing for defaults. we are preparing not to pay. the only reason for a collective action clause is to accept a renegotiation. it avoids the emergence of holdouts. if you are going to renegotiate, not to pay part of your debt. in france, we have that automatically in the bonds that we issue. whatever sacrifice you are being asked to make in your pensions and salaries and public services , it is for nothing.
the banks are saying, austerity, austerity, but it is no use. if you have good governance -- >> honestly, i do not think it is a question of republicans or democrats. it is political competition. people need to --i completely empathize with the democratic mayor. he is facing a shrinking taxable base because he he has population declines. there is a slight blip in gdp for detroit. there was a big drop in 2008, so i sympathize.
>> you are wrong with that. you show the pictures of the abandoned houses. why are those houses abandoned? option one is the person got a better job. listen. listen. the second reason why those houses are being abandoned is people are being evicted. >> i am sorry -- >> people are facing evictions every day in detroit. >> this is an equation that we have to pay for pensions and expansions and we cannot. >> more houses being abandoned and more evictions. >> you need a growth and you
need innovation and to get innovation, you need density. >> exactly. not evicting people to -- so you can sell their houses for $500. that makes no economic sense. >> everybody is a loser when that happens. >> you will not have any innovation without people. >> i understand both sides of the equation. the lesson we can take from this is sovereign risk is not necessary for states -- this is something that is new. companies that sell to public buyers forget the risk attached to this because a government may
not pay one day. if they live above their means. this is new for everybody and a lot of people do not know financing. we insure bonds that are given to city. we see an appetite from the private sector against the ability of a clause i sovereign -- quasi-sovereign entity. >> ralph atkins points out how with $3.7 trillion in securities, the u.s. municipal debt market is more than half the size of the eurozone. that is a lot of money. >> you will need a shrinkage. >> the message is we could
restructure before the effort was made. >> it took a long time. >> i used to work for the world bank. again, the second point i wanted to make which is key. what can you do about this? what you can do is spend your money better and stimulate innovation and r&d. you have to cater to the immediate needs of paying pensions. i am not worried about what can happen in the droid. -- detroit. the u.s. will never let down their people.
no matter who is picking on whom, this is an issue. >> how you share the burden is the issue. we have been talking about how much should they carry the can. on facebook, we have a comment. we should not avail. the auto companies. we should not bail out detroit -- we should not have bailed out the auto companies. we should not bail out detroit. this issue of sharing the burden that has been talked about so much since the crisis. over the weekend, the german finance minister said when it came to the issue of debt burden, it is a matter of justice and fairness that multinational companies pay their fair contributions. it is not just about sharing the burden among the states. multinationals have to pay. >> we are trying to -- the
lessons we got from the european crisis is that you cannot have a zimbabwe on the front tier of europe. when you look at the germans, we swim or sink together. the u.s., it took 100 years to be a monetary union. you would have the same problems , liquidity on the market. sharing the burden between the private sectors and the people,
hello there. welcome to "newsline." it's thursday, july 25 th. i'm catherine kobayashi in tokyo. a train has derailed in northwestern spain toppling passenger cars on their sides. spanish national railway has not released the casualty figures. but local authorities say at least 7 people are dead. a es