DETROIT, MI – Five months later, Federal Reserve officials say Detroit’s municipal bankruptcy could signal bigger problems in the United States, reuters.com reports.
The November decision after a 16-month court process that allows Detroit to shed $7 billion of debt, along with a similar decision from Stockton, Calif., might just be the start of widespread municipal problems.
According to reuters.com, New York Federal Reserve President William Dudley said earlier this week that “While these particular bankruptcy filings have captured a considerable amount of attention, and rightly so, they may foreshadow more widespread problems than what might be implied by current bond ratings.
“We need to focus our attention today on addressing the underlying issues before any problems grow to the point where bankruptcy becomes the only viable option,” Dudley said.
In November, U.S. Bankruptcy Judge Steven Rhodes approved the eighth and final version of Detroit’s plan to reduce its budget-crippling debt, estimated when the case began in July 2013 at $18 billion.
The decision allowed the a big, 10-year plan to restore city services to begin.