THE BLOG
07/19/2013 05:26 pm ET | Updated Sep 18, 2013

While Detroit Tries to Declare Itself Bankrupt, Banks Rake in Big Profits

AP

Sometimes reality isn't captured in a single headline or story. Instead, it's found in the juxtaposition of headlines that reflect the state of national and international affairs.

Take Friday's New York Times. The lead story told readers: "Billions in debt, Detroit tumbles into insolvency." -- a story that by day's end had dissolved into a legal donnybrook. Below the fold, in the lower left, the headline read, "Big banks, flooded in profits, fear flurry of new safeguards." And on the paper's web site, another headline read: "G-20 backs plan to curb tax evasion by large corporations."

So what do these three stories published on the same day tell us? First, that a city that once was America's manufacturing engine -- Wheel City, Motor City, Motown -- is so broke and so dysfunctional today that it has attempted to declare bankruptcy, the largest U.S. city to do so. Secondly, the headlines tell us that American banks are swimming in so much profit and corporations are so flush from legally laundering money overseas that both share concern that they might -- gulp -- actually be regulated.

Really, don't they know better. This is America, 2013, where economic 1 + 1 -- selfishness plus greed -- equals ever-greater disparity between the fat cats and everyone else.

I've written it before. We have largely become the Banana Republic Americans used to deride a half-century ago. The rich are partying like the Great Gatsby and then some, buying the loyalty of elected leaders, and crying Class Warefare anytime anyone suggests the wealthiest 1 percent probably shouldn't control more than a third of the nation's overall wealth and perhaps shouldn't have seen their incomes double as a percentage of the total economic pie in the last 35 years.

Let's just say the rich are clearly getting richer. Meanwhile, the poor and lower-middle class are struggling to stay above water as federal, state and local cuts pare pieces of Head Start, food stamps, summer jobs for kids and unemployment insurance, not to mention government jobs, when they're all needed most. This deepens the ruts of poverty and near poverty.

Just ask Detroit. It is at least $18 billion -- yes, billion -- in debt, The Times reported. Its population has shrunk from 1.8 million in its heyday in 1950 to 700,000 today. Its tax base has collapsed. It's infrastructure is in shambles. The Times reports that 40 percent of its street lights don't work.

A former student of mine who works in government posted a "City of Detroit: proposal for creditors," dated June 14, 2013 on Facebook last night, with the words, "this is actually happening in an American city." Among other things, the report notes that the city's unemployment rate a year ago (the latest figure cited) was 18.3 percent, that property taxes dropped 9 percent in a single year, that the violent crime rate was the highest in the United States and five times the national average.

But the fact that this is all "actually happening in an American city" doesn't seem to be causing much of a stir in Washington, or anyplace else outside of Michigan for that matter.

A White House spokesman said President Obama is "monitoring" the situation closely, Politico reported. I see.

Judging from Politico's website, Congressional leaders of neither party had much of anything to say about the city's collapse. Other, that is, than Tea Party darling Rand Paul, who announced, Politico reported, "I basically say [Obama] is bailing them out over my dead body."

You see, what Paul and the GOP know is that America's broke -- unless you work for the banks amassing vast profits or the multinational corporations robbing this country of the taxes they actually should be paying.

Take Starbucks, for example. As The Times noted in its story on the first tentative efforts of the world's largest economies to "curb widely used tax avoidance strategies," everybody's favorite maker of grande, no-fat lattes paid no corporate tax in Great Britain last year despite generating sales of $630 million. It used a legal shell game that's benefitted lots of other corporations in countries around the world. Such powerhouses as Exxon, Bank of America and GE paid zero U.S. taxes -- that's right, zero -- on billions of dollars in profits in 2009 and 2010 or, in the case of GE, 2005 through 2010, the Sundance-aired documentary We're Not Broke reported last year.

Meanwhile, The Times also reported Friday that while Detroit is drowning in its $18 billion in debt, the nation's six largest banks made $23 billion in profits in the second quarter of this year alone -- that's right, in three months.

Now I'm not a banker or an economist. But in lay terms, I've read enough to know that bank profits have little or nothing to do with anything tangible or beneficial to the public -- things like goods and services. Banking these days is more like gambling, with someone else's money. Banks buy stuff, repackage it, sell it. They do mortgage deals with fancy names that next to no one actually understands.

Of course when these deals collapse, as happened just a few years back, the public is left with the pain -- with mortgages homeowners can't pay, jobs that vanish, and interest rates that go poof when the federal government does all in its power to keep interest rates low. Judging from the latest round of bank profits, Big Brother -- that same U.S. government -- may be watching you and your phone calls but he's clearly paying little heed to the very people who brought us to the brink of financial collapse in 2007.

To put it another way, the banks are doing very nicely again, thank you.

Isn't it a shame in our free market economy that things haven't worked out quite as well for Detroit?