A man walks past a vacant, boarded-up home surrounded by overgrown grass in a once vibrant neighbourhood, near downtown Detroit. Investors dumped Detroit’s municipal bonds a day after the city’s historic bankruptcy filing. Inset: Michigan Governor Rick Snyder: the city’s problems had been 60 years in the making.

Agencies/Detroit

Michigan’s governor said yesterday he would not seek a US government bailout for Detroit, saying bankruptcy was a necessary path to rebuild the once great American auto city.

“And I don’t expect one. I’ve said before that the state cannot bail out the city of Detroit,” Rick Snyder said on CBS’ Face the Nation talk show.

“It’s not just about putting more money in a situation.”

The city filed for bankruptcy on Thursday, saddled with $18bn in debt and a tax base depleted by decades of population loss and urban blight.

It’s the largest US city to declare bankruptcy, and the move set off shock waves even though decades of fiscal mismanagement had made it forseeable.

Nearly half of the city’s debt is to underfunded pension plans and retiree health benefits, making current and former city workers potentially the biggest losers in a bankruptcy reorganisation.

Steven Rattner, the former investment banker who led the restructuring of GM and Chrysler, this week called on the federal government to step in with financial assistance.

Vice President Joe Biden, however, told reporters this week the administration did not know what it could do.

“I think it’s very difficult right now to ask directly for support,” Detroit Mayor Dave Bing, said yesterday on ABC’s This Week.

“They have been helpful, but now that we’ve done our bankruptcy filing, I think we’ve got to take a step back and see what’s next,” he added.

Snyder, a Republican, said he would seek federal assistance for targeted programmes like one to demolish some of the city’s 78,000 abandoned buildings.

But he said bankruptcy was needed to deal with the city’s staggering debt.

“This is 60 years of decline. This has been kicking the can down the road for 60 years. And my perspective on it: Enough is enough,” he said on NBC’s Meet the Press.

The city’s emergency manager said yesterday that Detroit must dig itself out of the hole it created and cannot wait to see if the federal government will come to its rescue.

Kevyn Orr, charged with guiding the collapsed Motor City out of the bankruptcy, said any outside assistance would be “great” but he is not banking on it.

“Hope is not a strategy from my perspective. I can’t plan on the basis of what may or may not happen or what help may or may not come,” Orr said on Fox News yesterday.

“We are not expecting the cavalry to come charging in,” he said. “We have to fix it because we dug the hole.”

Detroit has been hit hard by the move away from industrial manufacturing in America since the 1950s, its problems compounded by chronic mismanagement and a dwindling population. Retirees now far outnumber active workers among the city’s 700,000 residents, and unfunded pension liabilities are a key source of its problems.

After the economic collapse of 2008, Washington injected billions of dollars into automakers General Motors Co and Chrysler as the first step of a quick bankruptcy process. But the federal government made no promises this time.

The bankruptcy led investors to dump the city’s municipal bonds on Friday but Orr deflected criticism that it will be hard for investors to lend the city money again.

“The reality is, they are going to look at the credit rating of a rehabilitated city. And if that city is capable, they’re going to make rational decisions because they are financial institutions,” Orr said on the Fox programme.

“After some time, after this little kerfuffle, we’ll be back in business.”