CBS "Face the Nation" - Transcript: Detroit Bankruptcy



SCHIEFFER: And we'll be back in a minute to talk with Michigan's Governor Rick Snyder.

SCHIEFFER: It had been expected, but it still came as a shock this week when the city of Detroit filed for the largest municipal bankruptcy in history, a record $19 billion. Once the city of 2 million people, Detroit's population has plummeted to 700,000. It takes an hour for police to respond to calls. Almost half of the city's schools have closed in the last three years. Some consider Detroit an urban disaster area. Joining us this morning in the studio here to talk about the problems, Michigan Governor Rick Snyder. Governor, thank you so much for coming. Let me just start with the obvious. What does this mean for the people of Detroit? Are the police and firemen still going to get paid? Will some of them be laid off? What happens now?

SNYDER: Yeah, Bob, this is a very tragic situation, and this was a very difficult situation, but it's the right one. And we looked through every other viable option. We worked in good faith towards many other courses of action. And this has been 60 years in the making as you said, going back to the 2 million people Detroit once had. Ultimately, if you step back and say this is an opportunity to stabilize Detroit and grow Detroit, because you have to get back to the fundamentals of the -- the most important thing is not just the debt question. The debt question needs to be addressed -- $18 billion in liabilities. But even more important is the accountability to the citizens of Detroit. They're not getting the services they deserve and they haven't for a very long time. So, this can has been getting kicked down the road for decades. Enough is enough and now is the time to turn it around.

SCHIEFFER: Yeah, so what about it? Will your police force stay at the same level? Will you have to lay off people?

SNYDER: No, immediately what happens with bankruptcy is we are continuing normal operations, but I'll tell you, normal operations are not good enough. But people will still get paid. People are coming to work. People will get what I would describe as regular service. I wouldn't call it normal service. The good part is we have a number of steps in place to improve things in Detroit, because we need to do that. Again, they deserve a better answer, the wonderful people of Detroit. Because if you look at it, one thing that's already happened is there's a new police chief coming, there's are new police investigation. There are opportunities to look at these issues because in some cases, 58 minutes for a response time is absolutely unacceptable

SCHIEFFER: And what about the 20 - what do you have 20,000 people who are retired on city retirements? Will they -- is their retirement, is their pension in jeopardy? Can they expect it to be cut? What happens to them?

SNYDER: And that's one of the other tragic situation of this that your heart has to go out to anyone -- these retirees who worked hard for the city, they are on a fixed income. There's a challenge there. But I would say is, the bankruptcy process allows us to do it in a more thoughtful, more deliberate better way where they have a voice at the table. During the process that we've been going through about talking to creditors, no one wanted to represent the retirees. So, proactively in the bankruptcy petition we put in, we've asked the judge to put together a group of retirees, someone to represent the retirees so they can have a voice at the table. We can hear from them. The other thing I would mention to you, in particular. We've already said short term through the end of the year there won't any change. Beyond that, the real question also is to the degree the pension plans are funded, that there are assets, they're not part of this process. Those will continue. They will be there to help them. It's the unfunded piece. And there's a terrible history there of mismanagement, of poor investment, of other things that should get aired out publicly and should be part of this discussion.

SCHIEFFER: Let me ask you this: Mayor David Bing said this morning on ABC, I think, that no decision has yet been made on asking for a federal bailout. Do you think there is a federal bailout in Detroit's future?

SNYDER: No, and I don't expect one. I've said before the state cannot bail out the city of Detroit. And part of the context I would say that to you in is it's not about just putting more money in a situation; it's about better services to citizens. Again, it's about accountable government. And so what we're doing at the state level -- and I would ask the federal government the same thing -- is let's use -- let's come up with targeted programs where we can see there's real value to citizens for improvement. I'll give you one tangible illustration we are partnering with the city government, the state, and the federal government on is about taking down blighted structures. We were able to obtain $100 million that, hopefully within the next 30 days, we'll start deploying those dollars toward taking some of those 78,000 abandoned structures down. They have been going on for years.

SCHIEFFER: But, you know, the federal government bailed out General Motors. It bailed out Chrysler. That worked out pretty well. Are you saying that that is just simply not on the table as far as you're concerned?

SNYDER: If the federal government wants to do that, that's their option. That's always their alternative. The way I view it is, I want to partner with all levels of government and stay focused on services to citizens.

SCHIEFFER: But you, as a state official, you would not ask the federal government to do that?

SNYDER: Again, I don't view that as the right answer. The right answer is bankruptcy is there to help deal with the debt question. The more important question is better services to the citizens, police, fire. Think about the poor child, the young girl walking to school in October, going by blighted structures, wondering is it safe. Those are -- that's the situation we have to focus on. And those can be very focused, targeted things that we can measure results and make sure we're doing a better job.

SCHIEFFER: And what about bond holders? What of people that own these municipal bonds, once considered the safest investment one could make? Are their -- are their bonds in danger here?

SNYDER: That's going to be part of this process. And realistically, if you step back, if you were lending to the city of Detroit in the last few years, didn't you understand there are major issues and problems? And look at the yields they're obtaining compared to other bonds. They were getting a premium. So this is a tough situation where you need to walk through it. But basically Detroit hasn't had a positive fund balance since 2004 in its general fund -- 2004. So this isn't a recent occurrence. This has been going on. And that's my point is, enough is enough. One thing I'd really emphasize, there are great things going on in Detroit outside of city government. So I'd view this as removing the last major negative obstacle is, young people are coming; business is coming. Let's get this resolved. Let's grow Detroit.

SCHIEFFER: Well, Governor, you've got a hard job ahead of you and I know all of us wish you the best of luck with this. Thank you so much for taking time to join us. I'll be back in a minute with some personal thoughts about Helen Thomas. Stay with us.