Obama administration begins stealth bailout of Detroit

Neil Munro White House Correspondent
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President Barack Obama is using $100 million in taxpayer cash to help keep Detroit’s pension funds afloat, contradicting his administration’s commitment to avoid a bailout.

The federal $100 million is being described as “blight remediation,” but it allows the city’s new managers to reshuffle more cash into the city employees’ pension funds, which were looted by city and union officials for several decades.

The stealth bailout was exposed by the Detroit Free Press, which said the $100 million would be taken from the so-called “Hardest Hit Fund.” That fund was created by the administration in 2010 to counter the disastrous implosion of the federally-inflated real estate bubble.

White House officials have consistently tried to downplay public concerns that he would bailout the city.

“To have floated [a bailout] would have given false hope and taken people’s eye off the important task ahead so what we tried to do was make clear that the federal government — we did not have tools at our disposal that could be helpful to Detroit,” Gene Sperling, the director of the White House National Economic Council, said in February. (RELATED: Judge orders Detroit bankruptcy to be withdrawn, claims ‘it’s not honoring the president’)

On Wednesday, White House spokesman Jay Carney declined to comment about the report. “Well, I haven’t seen the reports so I’m afraid I can’t offer any comment on them, but I’ll take the question,” he said.

But Obama is facing a tough midterm election, and he is being pressured by his union allies to top up the pensions funds.

The funds were drained by unconventional practices, including the periodic payout of funds to employees in years when the funds’ value were boosted by Wall Street investments.

Detroit has been under Democratic control since the departure of Louis Miriani in 1962, when the city’s residents had the nation’s highest per capita income.

The city crashed in the 1970s, amid racial acrimony and incompetent management at the city’s vital auto plants.

Many other cities and states face severe pension difficulties. They’re led by Chicago and Los Angeles, where Democratic control has boosted the pensions of government employees.

Michigan’s Republican governor, Rick Snyder, has promised to send $350 million in state funds to the city.

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