Gov. Rick Snyder: Government bailout is the wrong answer for Detroit

Michigan Gov: Detroit bankruptcy "tragic," but "right decision"
Michigan Governor Rick Snyder discusses the city of Detroit's bankruptcy declaration.

Gov. Rick Snyder, R-Mich., said Sunday on "Face the Nation" that granting Detroit a government bailout would be the wrong way to help the bankrupt city.

"I do not view that as the right answer," Snyder told "Face the Nation" host Bob Schieffer when asked whether he would ask the federal government for a bailout. "The right answer is, bankruptcy is there to deal with the debt question."

Snyder said the state cannot bail out Detroit, and while the federal government will make its own decision on a bailout, he said, "I don't expect one."

"It's not just about putting more money in a situation," the governor said. "It's about better services to citizens again. It's about accountable government."

On Thursday, after years of jobs and residents leaving the city, Detroit became the biggest U.S. city to file for bankruptcy. The population has dwindled from nearly 2 million in the 1950s to around 700,000, and the unemployment rate is 16 percent. It takes an hour for police to respond to calls, and almost half the city's schools have closed in the last three years.

"Face the Nation" host Bob Schieffer noted that after the auto industry meltdown in 2009, the federal government effectively bailed out to General Motors and Chrysler, the two American auto companies that still had factories in Detroit. Snyder, however, said that he would prefer for the federal government to work with the state on creating targeted programs that can tangibly improve services for citizens.

For instance, Snyder said, the city, state and federal governments are working on taking down blighted structures. Within the next 30 days, Snyder said $100 million will be deployed to start taking down some of the 78,000 abandoned structures in the city.

"Think about the poor child, the young girl walking to school in October, going about blighted structures, wondering is it safe?" the governor said. "That's the situation we have to focus on, and those can be very focused, targeted things where we can measure results and make sure we're doing a better job."

Snyder said the bankruptcy was "60 years in the making," and the government looked through every viable option before going that route.

"Ultimately... this is an opportunity to stabilize Detroit and grow Detroit," he said. "The most important thing is not just the debt question. The debt question needs to be addressed... but even more important is the accountability to the citizens of Detroit. They are not getting the services they deserve, and they haven't for a very long time."

Snyder said that government services like law enforcement will continue with "normal operations," and that steps to improve city services are already taking place, such as bringing in a new police chief. Furthermore, the governor argued that the bankruptcy process would allow the city to address the "challenge" of pension funds "in a much thoughtful, more deliberate way."

"During the process that we've been going through by talking to creditors, no one wanted to represent the retirees," he said. "So, pro-actively in the bankruptcy petition we've 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."

When asked whether municipal bonds were in danger, Snyder said, "that's going to be part of this process."

Snyder added, "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 were major issues and problems? Look at the yields they're obtaining compared to other bonds. They were getting a premium... Basically, Detroit hasn't had a positive fund balance since 2004 in its general fund. 2004. So this isn't a recent occurrence."