Steve rattner,. Here is the important point, you can get ahead of the curve on this stuff if you start to take steps, if you start to say okay for people who are hired now, the Retirement Benefits eventually are going to be lower, for people who are higher now, retiring healthcare will eventually be different, the rob with detroit is they were like, literally like the cartoon you are running along and suddenly you lack down and nothing below you and you just collapse and that is really what happens there. We continue with peter king, all things nfl at the beginning of the training examples. Who is the best quarterback going into the new season . I would say right now, today, it would be Aaron Rodgers. Rose would you really . With i think Peyton Manning and tom brady, 1b, and 1 c. Manning especially because he is a year removed from, you know, having four neck surgeries in two years and i think, i am hearing very good reports about the strength of his arm, he has got a great deep threat to demare use thomas, i think he is going to have a great career but Aaron Rodgers to me, think because of his mobility and because of his improvisational ability on the move, with the pass rushers being so fast, a lot of them are basically sprinters, you know, you are not going to be able to get away as well if you are manning or brady, Aaron Rodgers can get away. Rose we conclude with tull situate gabbard the youngest would in congress. This is a lot we can do, and this is where i feel there is opportunity, yes, there is great frustration right now, both in congress and in our communities across the country at the lack of action, the lack of really having people who understand that we are americans first, putting the partisan politics to the side, and not leaving idealism and principles at the door but having respectful and sincere conversations and saying how can we best serve our country, and that is where i think there is opportunity to be able to affect some of these changes. Rose rattner, king and gabbard when we continue. Opportunitying for, funding for charlie rose was provided by the following. Rose additional funding provided by these funders. And by bloomberg, a provider of multimedia news and Information Services worldwide. From our studios in new york captioning sponsored by Rose Communications from our studios in new york city, this is charlie rose. Rose we want to talk about a Great American city that is declaring bankruptcy, last week detroit filed for bankruptcy, making it the largest American City in history to do that, detroit is said to be at least 18 billion in debt, its quick rise during the first half of the 20th century was ignited by the birth of the Auto Industry, its fall in recent decades has been equally dramatic, a slew of looming liabilities that include overwhelming healthcare and pension costs and emergency manager is in charge of the city to help resolve its problems but the process could take months or years to resolve. We want to talk about what happened to detroit with steve rattner. He earned the title car czar when he led president obamas efforts to restructure the leading auto makes, all the based in detroit, in full disclosure he is a supporter of this program. I am pleased to have him back at this table. Welcome. Thank you, charlie. Rose lets just start with the obvious, how is this different from the auto bankruptcy . It is different in that it is a city, it is not a set of companies. So they dont make profits. Rose right. They dont sell cars, they collect tax revenues so it is a different kind of financial problem, it is a different kind of mismanagement, but the fundamental idea that you are bankrupt, you are insolvent and dont have enough money to pay your bills, you have overwhelming liabilities, those are similar factors. And a chapter 11 versus chapter 9, i think. Technical matter you file under different parts of the Bankruptcy Code, chapter 9 from municipalities chapter 11 for companies. Rose and the biggest debt is for healthcare and pensions . So that is one of the differences here from the Auto Companies, the Auto Companies had some pension issues, they had some healthcare issues, but their Biggest Issue is just plain old a fashioned debt, detroits Biggest Issue more than half of that 18 billion is just a little more than half of that 18 billion is healthcare for retirees for future retirees and then a shortfall in the pension fund and that is a very different kind of problem and that makes detroit in many ways a much tougher problem because you cant haircut, there arent that many people to haircut except for these workers and these retirees. Rose and so when you look at detroit as a municipality, are we looking at detroit as an example of what might very well happen to other American Cities . Or does it standalone as a unique situation . A little bit of both. Detroit is certainly a unique situation in america, at least to my knowledge, i dont know another city that has fallen so far, so fast, certainly of any size with these kinds of liabilities, the other municipal bankruptcies that have occurred in the u. S. Are mostly special situations, bad bond issue, the california limitation on taxes, things like that. Detroit is a very unusual situation, but it is a little bit of a canary in the mind shaft in terms of the fact many of these Pension Funds are not fully funded, many of the promises that were made to retirees about healthcare are not funded at all, actually, and we are going to have to deal with that at some point. Rose and how do we deal with that at some point . There is only a limited number of ways to deal with that, you can reduce benefits by some amount, you can raise taxes by some amount. Those are you dont have a lot of leverage. Rose you can get some type of bailout to some amount . You can to a point, the federal government can help and you cant solve all of these problems, politically in appetite there is no appetite to solve any of these issues and spend money on these problems here is the important point you get ahead of the curve on these points if you start to take steps and start to say okay for people hired now, the Retirement Benefits eventually are going to be lower, for people who were hired now, the Retiree Healthcare is eventually going to be different, the problem with detroit is, they were like literally like the cartoon you are running along and suddenly you look down and there is nothing below you and just collapse and that is really what happened there. You said in fact in writing it was always a question of when, not whether it was going to happen or not. Well, i learned a lesson from the Auto Companies that you that restructuring these kind of huge problems with these massive liabilities without the help of the Bankruptcy Court was impossible, thats why i thought it was inevitable, there are too many actor and literally tens or huh dreads of thousand of people involved with this, whether retirees or bondholders, whatever and without the use of the Bankruptcy Code you cant get them all to the table. Rose what is the role of the federal government . As you know, i have written about this. Rose yes. And i do believe and i understand the arguments on both sides and we can have that discussion, but on balance, i come out that i do believe, probably the state first and maybe to a lesser degree the federal government have some responsibility, maybe not responsibility, but they should feel some desire to help here, because, yes, the voters of detroit elected bad governments for a long time, yes there has been mismanagement there for a long time, yes the unions didnt help the situation in terms of some of the demands they made in better times, but right now you have 700,000 people in detroit suffering through this, not really being their fault, you have 21,000 retirees, i dont think it is really their fault, and they are being asked to take an amount of pain i dont believe anyone else has taken in a bankruptcy whether it be private sector or Public Sector. Rose and so the solution is to share the pain . Well, the solution i there i have to help, americans are about helping and we help people when Hurricane Sandy comes with he help people when katrina comes you help people with when we have devastation from crop failures we help people that is what america is, i dont mean to get maudlin on it. Rose and and every year the state of new york, citizens of new york pay billions of dollars more in value taxes than we get back, that money goes to alabama, mississippi and poor states that is what this country is about, and so there is another part of this problem, by the way which is detroit just getting rid of these liabilities doesnt solve the problem, detroit has to now rebuild itself, it has to reinvest. Rose some kind of economic engine. Well, first it has to deliver services as you know it is 60 minutes average Response Time for a police call in detroit today, 11 minutes National Average you know all of these figures so we, it has to rebuild its services and economy and all of that takes moneys and i think there are ways the state and the federal government can help that are consistent with our mission. Rose is this kind of stimulus money . You can think of it as stimulus money, i prefer to call it investment money you can provide. We have a whole department of housing and urban groment in washington that spends billions of dollars every year helping municipalities invest and build, i am sure there is money that can come from there, you can have guarantee programs, ther te are a lot of ways the government can help if they choose to. Rose what is the attitude of the governor of michigan. He is in a rather he is in a rather odd position because he is a conservative republican, he said that detroit was not going to go bankrupt and now it has gone bankrupt so he is having to explain that away, he has a republican controlled legislature, soso far his position has been no direct help, we are helping in quote other ways. I think that before this is over, the state of michigan is going to have to help, because the numbers just dont work, i cant make the numbers work without some kind of help from outside. Rose and say, the state of michigan can do that . It has the resources to do that . Yes, we are not talking about a huge amount of money here, all of their liabilities are 18 billion it is not a small amount but a few billion dollars would make a big difference. So what is the object lesson here . Be careful with the kind of commitments you make . If you have a declining economic base . I think there are a series of lessons, first there is the lesson that economic the economic engines have to be constantly maintained and reinvigorated, the famous phrase of our detroit, as you pointed out the automobile created detroit and also destroyed detroit in a lot of ways so that is sort of one lesson, you have to stay focused on Economic Development you look at pittsburgh that lost the Steel Industry but today is doing quite well as a city because they found other things to do, the second lesson you have to learn is integrity in government, detroit had a series, the current mayor is a good guy but they had a series of corrupt. Rose the previous one went to jail. Went to jail, mayors and the citizenry didnt really do anything about that and thirdly we have to be careful about the promises we make, and there is no question that detroit made promises to its workers, borrowed money for other projects that it just simply never could have responsibly repaid. Rose and the way, in a way this is kind of a reflection of america, because of its Manufacturing Base is being eroded . The as reflection of america because already so many rose the rust belt as they say. There are so many aspects of this that resemble america, as i said in an enlarged way, in a way that is disprortion that to the rest of the problem but they lost 90 percent of their manufacturing jobs inside the city of detroit, so that is part of the problem. Yes, they made a series of promises well beyond their means, but we have done the same thing with medicare, to a lesser degree with oash social, many other states and cities have done the same thing, you have a lack of political accountability, a lack of citizenry rising up and saying these are bad guys and we want to get some good guys, you see that happening in a lot of parts of america so i think there are a lot of lessons from detroit that we should all take to heart in terms of how we go about our business. Rose when you headed up the effort to save the Auto Industry, rescue the Auto Industry did the president say we have saved detroit . The president said during the campaign i made a decision not to let detroit go bankrupt, that that sound bite has been on the air a lot the last few days, what he meant by that, i dont think he was thinking at all about the city of detroit at that moment, he meant the Auto Companies, he meant the detroit 3, he never really spoke about the city of detroit, we did make a conscious decision during the auto rescue to ask General Motors to keep its headquarters in detroit even when they were thinking of moving it outside but beyond that we did nothing for detroit as part of the auto rescue. If someone can come up, write a check for 18 billion, that is not enough because you have to build a base to move forward in the future . What kind of economic base can they build . Well, the current mayor has proposed emergency mayor has proposed a one and a quarter billion dollars Spending Program over ten years that would give you more design to get services up to par. Rose to create a Service Economy to match whatever the manufacturing economy is from the autos. Really to get to the point detroit can deliver basic Municipal Services here is a statistic, the state of michigan, including detroit has more engineers than the other 49 states and can kaput together. There are a, there is a lot of talent in detroit and the environs a lot of people who were trained as engineers and to do useful things, and one of the things that does happen is you have kind of an automatic economic adjustment in the sense that housing is now very cheap in detroit. Dan gilbert who owns quicken loans he has been buying downtown detroit buildings partly as a civic gesture and part because it was cheap and could save his money in and cheaper than out in the suburbs, i think if detroit can deliver basic services and give businessmen confidence the city will function i think you will see people take advantage of the low cost of being there. Rose so this is paul krugman writing in the new york times, so detroit just uniquely irresponsible . Again, no detroit does seem to have especially bad government but for the most part the city was just an innocent victim of Market Forces. What, Market Forces have victims . Of course they do, sometimes it loses from economic change or individuals whose skills have become redundant and sometimes there are companies serving a market niche that no longer exists and sometimes there are whole cities that lose their place in the economic ecosystem. Decline happens so by all means lets have a serious discussion about how cities can best manage the transition when their traditional source of competitive advantage go away. The important thing is not to let the discussion get hijacked greek style, we know, obviously, he is talking about the euro zone. Lets separate that into two points and lets talk about sort of the personal standpoint. My father owned and ran a small paint Manufacturing Company in queens, that was our livelihood when i was growing up, Manufacturing Companies all over Long Island City and queens, every one of them is gone today, Long Island City went through a long period of basically being asleep and now if grew over there, you see big apartment towers, you see restaurants, you see nightlife and being reinvented, new york city was the manufacturing capital of america during the industrial revolution, we had chemical plants and all kinds of things and we and we have reinvented ourselves so i agree with paul krugman about that, cities can reinvent themselves where i dont completely agree with him he is also trying say that the pension issues in detroit are really or in the country actually are really small po at es, he said they are a trilliondollar i have, i havent audited the numbers, trillion dollars is a fair amount of money even if that is the right number, i suspect the right number could be higher i think we have to be cognizant of the promises we make all across the country. Rose how long will this take again . This will take at least a year. Hopefully not too much longer, the terms of the city manager ends in about 14 months so something has to happen within that time frame. But the problem is, i cant as said earlier, i cant get the numbers to add up. The amount of pain being inflicted on the retirees i dont think is going to be sustainable. You have a group of bondholders who are being asked to give up also 90 percent of what they have, who are fighting that in court and claiming they dont have to do that. The Pension Funds are claiming under the Michigan State constitution they cant be haircut at all, so this is and so even if everybody took the pain it is not clear to me detroit has enough money, if you start giving stuff back the numbers are hard t