Detroit Bankruptcy Fuels Worries across the US

September 9, 2013

Unlocking Word Meanings

Read the following words/expressions found in today’s article. 

1. bankruptcy [BANGK-ruhpt-see, -ruh p-see] (n.) – the financial condition of not having enough money to pay for one’s debts
Example: After struggling financially for several years, the car company finally declared bankruptcy.

2. pension [PEN-shuh n] (n.) – money paid by the government or a company to someone who is sick or has retired
Example: Her father is now retired and living on the pension he receives every month.

3. downgrade [DOUN-greyd] (v.) – to lower someone or something’s rank or status.
Example: The financial analysis firm downgraded the country’s credit rating because of its inability to pay its debts on time. 

4. speculation [spek-yuh-LEY-shuh n] (n.) – the act of guessing or considering something
ExampleSelling her car and other properties fueled speculation that she was in financial trouble.

5. big/bigger picture [big PIK-cher] (idiom) – a wider perspective focusing on important facts about a situation
ExampleThe boss told his employees to look at the bigger picture and not worry over the small and temporary problems.


Read the text below.
Many people are now wondering whether other major cities in the US will soon face serious financial problems after Detroit filed for bankruptcy in July.

Detroit has an $18.5 billion long-term debt, most of which came from program costs for retiree health care, pension, and other post-employment benefits. For the past years, smaller cities have also been filing for bankruptcy. Some of these cities are Stockton and San Bernardino in California.

Also one of the cities facing financial troubles is Chicago, whose credit rating was recently downgraded by top financial analysis firm Moody's due to the city's $19 billion pension liabilities. Moody's is also reviewing other cities such as Cincinnati, Minneapolis, Portland, and Santa Fe for a possible credit downgrade.

The financial troubles of local governments across the US have led to speculation as to whether more cities would follow Detroit. According to Timothy Blake, managing director of Moody's, more bankruptcy filings could follow, especially if doing so would successfully cut the city’s debt and other liabilities.

However, according to Standard and Poor's, another top financial analysis company, other cities are not likely to follow suit since Detroit's bankruptcy is an isolated case and does not represent the bigger picture in the US.

Jane Ridley, a credit analyst at Standard and Poor's, said that governments are willing to repay their debts and have a strong capacity to do so. Moreover, filing for bankruptcy would limit the company's access to credit markets. Filing for bankruptcy is therefore an unlikely option for most cities.

Viewpoint Discussion

Enjoy a discussion with your tutor.  

Discussion A

·         Do you think Detroit’s bankruptcy is part of a wider problem in the US or is it just an isolated case? Please explain your answer.
·         Do you think a company or city can still recover after filing for bankruptcy? Why or why not?

Discussion B

·         How can a person manage his or her finances well? Please explain your answer.
·         What should a person do in times of financial difficulty? Please explain briefly.


September 9, 2013