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Apple, Google, dozens of others urge U.S. surveillance disclosures
7/19/2013 4:03:45 AM

(Reuters) - Dozens of companies, non-profits and trade organizations including Apple Inc, Google Inc and Facebook Inc sent a letter on Thursday pushing the Obama administration and Congress for more disclosures on the government's national security-related requests for user data.

General Keith Alexander, director of the National Security Agency, suggested he was open to the idea but that officials were trying to determine a way to disclose that information without jeopardizing FBI investigations.

"We just want to make sure we do it right, that we don't impact anything ongoing with the FBI. I think that's the reasonable approach," Alexander told the Aspen Security Forum in Colorado, when asked about the letter.

Together with LinkedIn Corp, Yahoo! Inc, Microsoft Corp, Twitter and many others, the companies asked for more transparency of secret data gathering in the letter addressed to Alexander as well as President Barack Obama, Attorney General Eric Holder and national security leaders in Congress.

Tech companies have been scrambling to assert their independence after documents leaked last month by former U.S. security contractor Edward Snowden raised questions about how much data on their clients they handed over to the government to aid its surveillance efforts.

The leaks have renewed a public debate over the balance between national security and privacy, and have put tech companies in an awkward position, especially because many have been assailed for their own commercial use of customer data.

Some companies, including Facebook and Apple, struck an agreement in June with the government to release some information about the number of surveillance requests they receive. But they were limited to disclosing aggregate government requests for data without showing the split between surveillance and criminal requests, and only for a six-month period.

In Thursday's letter, they asked to be allowed to regularly report statistics on the number and scope of user data requests done under specific national security authorities and the number of individuals, accounts or devices affected by those requests.

'THEY DON'T HAVE A CHOICE'

Alexander said it was important to keep in mind that companies were compelled by U.S. law to hand over data.

"They don't have a choice. Court order, they have to do this," he said.

"From my perspective, what they want is the rest of the world to know that we're not reading all of that email, so they want to give out the numbers. I think there's some logic in doing that."

The letter also asked Congress to pass legislation that would require the federal government to make transparency reports and let companies disclose user data requests without having to ask a court for permission.

Co-signers included investors such as Boston Common Asset management and Union Square Ventures, as well as scores of associations including Human Rights Watch, Electronic Frontier Foundation, the American Civil Liberties Union, Americans for Tax Reform and conservative FreedomWorks.

One of the lawmakers to whom the letter was addressed was Senate Judiciary Committee Chairman Patrick Leahy, a Democrat who has introduced a bill that would expand reporting requirements for the secret programs, add more court reviews and move up the expiration of the authorization for some of the data collection by 2 1/2 years.

"Americans deserve to know how much of their communications data is being swept up by government surveillance, and the government's use of these authorities must be subject to strong oversight," Leahy said on Thursday.

He said the Judiciary Committee would hold another hearing on the issue later this month.

The White House and Department of Justice did not immediately comment on Thursday's letter.

(Reporting by Alina Selyukh in Washington and Phil Stewart in Aspen, Colorado; Editing by Karey Van Hall and Peter Cooney)

EADS set to reorganise, may change name to Airbus
7/19/2013 3:55:40 AM

By Tim Hepher and Sabine Siebold

PARIS/BERLIN (Reuters) - EADS is set to reorganise some business units as part of a strategy review that could also see the European aerospace group change its name to Airbus, people familiar with the matter said on Thursday.

The shake-up aims to provide greater discipline and cohesion to disparate defence activities, but EADS is expected to abandon a long-term goal of balancing defence and commercial revenue after last year's failure of merger talks with BAE Systems .

The overhaul, to be discussed by the board at end-July, will try to balance investors' enthusiasm for Airbus jetliner revenue with the backstop of defence, but is likely to strike a pragmatic tone as Europe remains mired in uncertainty and debt.

"There will be some big announcements, but not necessarily a lot of strategy in this review. It is more to do with structure and profitability," said a person closely watching the process.

EADS has been under pressure from markets to give greater weight to its commercial operations led by planemaker Airbus, amid stronger than expected orders for jetliners during the downturn as airlines try to lower their fuel bills.

Many fund investors opposed efforts by EADS last year to merge with Britain's BAE Systems, a proposal that was eventually scuppered by political opposition from Germany. After the deal fell through, shares in the company soared.

EADS previously targeted a 50-50 mix between commercial and defence revenue by the end of the decade, but analysts say the failure of BAE talks spelled the end of "Vision 2020". Airbus makes up two-thirds of EADS revenue and is still growing fast.

A shake-up in corporate governance shortly after the collapsed talks gave more power to the company's management, led by Chief Executive Tom Enders who launched a strategy review.

The exercise is expected to try to steer a middle course, without ruling out too many options for opportunities that may arise once Europe emerges from its financial crisis.

"The BAE route is blocked and the pure-commercial route is too risky," said a person familiar with the discussions.

Among options being considered is greater overlap between the group's defence and space activities, several sources said.

Defence unit Cassidian helps build the four-nation Eurofighter combat jet and the Astrium space unit makes the Ariane rockets.

"There are important synergies between Cassidian's electronics and defence activities and Astrium's military satellites, and integrating them more would make sense," said analyst Christophe Menard at Kepler Cheuvreux.

"You can't think about defence electronics applications without satellite support, which is one reason why (France's) Thales and (Italy's) Finmeccanica do both."

AIRBUS BRAND BOOST

Enders faces the delicate task of reshaping and better-defining the defence activities, without disturbing the commercial narrative backed by investors who have driven up its shares 41 percent this year, after a 22 percent rise in 2012.

"EADS has realized that it is better-perceived with investors if it has a low exposure to defence," a banker said.

EADS defence-related revenue makes up some 12 billion euros (10.3 billion pounds) a year, more than twice that of Cassidian alone.

Eurocopter, the world's largest commercial helicopter maker, also supplies the military and Airbus has a foothold in defence through the A400M airlifter of Airbus Military.

To reflect an increased bias towards aerospace, the company has revived proposals to drop the name EADS - 13 years after it was born as European Aeronautic Defence and Space Co from a merger of significant French, German and Spanish assets.

Enders has long supported changing the name to Airbus Group and appears to have support of Airbus Chief Executive Fabrice Bregier, the sources said. Eurocopter's name could also go.

In both the reorganization and rebranding exercises, EADS could, however, be headed for friction with Germany, experts warn.

Berlin has strategic interests in Cassidian and has also fought what some close to Chancellor Angela Merkel see as rising French influence over the Toulouse-based planemaker Airbus.

Although the name Airbus was first registered in Germany, previous attempts to change the name were blocked by former core industrial shareholder Daimler AG , which until recently represented Germany's strategic interests in EADS.

With elections looming in Germany, any job losses at parts of Cassidian seen as most vulnerable to restructuring or being sold, such as some security activities, could also stoke tensions.

Changes must also be agreed by a newly independent board which is said to be anxious to see as much strategic impetus as possible in the new game plan to compete with Boeing Co .

Some do not rule out delaying a decision on the group's name until the basic direction and organisation have been agreed.

(Additional reporting by Sophie Sassard in London and Arno Schuetze in Frankfurt; editing by Matthew Lewis)

U.S. overhauling intelligence access to try to prevent another Snowden
7/19/2013 3:52:45 AM

By Phil Stewart

ASPEN, Colo. (Reuters) - The United States is overhauling procedures to tighten access to top-secret intelligence in a bid to prevent another mega-leak like the one carried out by former spy agency contractor Edward Snowden, senior U.S. officials said on Thursday.

The National Security Agency, which Snowden worked for as a Hawaii-based contractor, said it would lead the effort to isolate intelligence and implement a "two-man rule" for downloading - similar to procedures used to safeguard nuclear weapons.

"When are we taking countermeasures? ... The answer is now," Deputy Defense Secretary Ashton Carter told the Aspen Security Forum in Colorado.

NSA Director General Keith Alexander told the forum the two-man rule would apply to system administrators like Snowden and anyone with access to sensitive computer server rooms.

"You limit the numbers of people who can write to removable media," Alexander said. "Instead of allowing all systems administrators (to do it), you drop it down to a few and use a two-person rule."

"We'll close and lock server rooms so that it takes two people to get in there."

Carter partly blamed the security breach on the emphasis placed on intelligence-sharing after the wake of the September 11, 2001, attacks, which eventually allowed someone like Snowden to access so many documents at once.

"We normally compartmentalize information for a very good reason, so one person can't compromise a lot," Carter said. "Loading everything onto one server ... it's something we can't do. Because it creates too much information in one place."

Alexander said Snowden had been trusted with moving inside networks to make sure the right information was on the computer servers of the NSA in Hawaii.

HOW MUCH DID SNOWDEN STEAL?

Snowden fled to Hong Kong in May, a few weeks before publication in Britain's Guardian newspaper and the Washington Post of details he provided about secret U.S. government surveillance of Internet and phone traffic.

The disclosures by Snowden, who is wanted on espionage charges, have raised Americans' concerns about domestic spying and strained relations with some U.S. allies.

The 30-year-old American who has had his U.S. passport revoked, is stuck in the transit area of Moscow's Sheremetyevo airport and has applied for temporary asylum in Russia.

"A huge break in trust and confidence," Alexander said, adding that extremists, aware of the surveillance, were altering their behaviour "and that's going to make our job tougher."

Alexander declined to say how many documents Snowden took, but when asked whether it was a lot, he said, "Yes."

Carter said the assessment was still being conducted, but "I can just tell you right now the damage was very substantial."

Senator Dianne Feinstein, who chairs the Senate Intelligence Committee, said last month that U.S. officials advised her that Snowden had roughly 200 classified documents.

But American officials and others familiar with Snowden's activities say they believe that at a minimum, he acquired tens of thousands of documents.

Asked whether U.S. officials had a good idea of what Snowden actually downloaded, as opposed to simply read, Alexander said, "We have good insights to that, yes."

Current and former U.S. officials said on condition of anonymity that while authorities now thought they knew which documents Snowden accessed, they were not yet entirely sure of all that he downloaded.

Snowden was adept at going into areas and then covering his tracks, which posed a challenge in trying to determine exactly what materials he had accessed, officials said.

Former and current U.S. officials told Reuters that a massive overhaul of the security measures governing such intelligence would be extremely expensive.

Alexander also said it would take time to implement across the Pentagon and the broader U.S. intelligence community. He also noted there were "15,000 enclaves," some of which are small.

"One of the things we can do is limit what people have access to at remote sites and we're doing both. So we're taking that on," he said.

Among U.S. allies, German Chancellor Angela Merkel is under pressure to toughen her stance on the U.S. program.

Alexander said the program had helped European allies including Germany, France and Denmark, without offering details. Asked about his reaction to German expressions of surprise, Alexander stated: "We don't tell them everything we do or how we do it. Now they know."

(Additional reporting by Tabassum Zakaria and Mark Hosenball; Editing by Christopher Wilson and Peter Cooney)

Residents wary as Detroit faces uncertain future in bankruptcy
7/19/2013 3:15:14 AM

By Steve Neavling

DETROIT (Reuters) - Some Detroit residents voiced scepticism on Thursday that the former U.S. manufacturing powerhouse would emerge in better shape from its historic bankruptcy filing designed to fix the city's financial crisis.

Hours after learning Detroit filed the largest municipal bankruptcy in U.S. history, residents spoke of the stark realities that come with living in a financially broken city.

"It was like putting a thumb in a dam," said Jodie Holmes, 55, as he leaned against an abandoned restaurant marked with graffiti, waiting for a bus to take him to his temporary job.

"I don't know if bankruptcy will help us or drop us to our knees," he added.

Detroit filed Chapter 9 bankruptcy in federal court on Thursday. The bankruptcy, if approved by a federal judge, would force Detroit's thousands of creditors into negotiations with the city's emergency manager, Kevyn Orr, to resolve an estimated $18.5 billion (12.1 billion pounds) in debt that has crippled Michigan's largest city.

Detroit was once synonymous with U.S. manufacturing prowess. Its automotive giants switched production to planes, tanks and munitions during World War Two, earning the city the nickname of the "Arsenal of Democracy."

Now a third of Detroit's 700,000 residents live in poverty and about a fifth are unemployed.

"Maybe bankruptcy will help. I don't know," said lifelong Detroiter Damien Collins, 68, outside his east-side house surrounded by abandoned homes.

The retired autoworker said he had given up hope anything would bring back Detroit.

"Nothing else has worked, so why not try it?" he asked.

Detroit's economic struggles have resulted in a deterioration of city life. The murder rate is the highest in nearly 40 years, only a third of its ambulances were in service in the first quarter of 2013 and nearly 78,000 abandoned buildings create "additional public safety problems," Michigan's Republican governor, Rick Snyder, wrote in a letter accompanying the filing.

Residents have also had to cope with a breakdown of services. Forty percent of street lights were non-functional in the first three months of this year, while the police took an average of 58 minutes to respond to emergency calls, more than five times the national average. The city government has also been plagued by mismanagement and political corruption.

"Detroit has a lot to offer, but we need a clean sweep of politicians," said Joanna Maslach, 30, a restaurant manager. "There's still too much corruption here. It's too dysfunctional."

Jim Fields, 37, who recently moved to a downtown loft from the suburbs, is one who believes the city is poised for a comeback. He is among a growing number of professionals moving to historic buildings converted into loft spaces.

"Bankruptcy hits the reset button," the software engineer said. "It's a golden opportunity to make this city right again. I'm very hopeful."

(Writing by Brendan O'Brien; Editing by Nick Carey; Editing by Peter Cooney)

Detroit files for bankruptcy, stage set for court fight
7/19/2013 3:15:14 AM

By Nick Carey

DETROIT (Reuters) - Detroit filed the largest municipal bankruptcy in U.S. history on Thursday, setting the stage for a costly court battle with creditors and opening a new chapter in the long struggle to revive the city that was the cradle of the American auto industry.

The bankruptcy, if approved by a federal judge, would force Detroit's thousands of creditors into negotiations with the city's Emergency Manager Kevyn Orr to resolve an estimated $18.5 billion (12.1 billion pounds) in debt that has crippled Michigan's largest city.

Michigan Governor Rick Snyder said he saw no other options for Detroit and approved Orr's request to file for Chapter 9 bankruptcy protection.

"Detroit simply cannot raise enough revenue to meet its current obligations, and that is a situation that is only projected to get worse absent a bankruptcy filing," wrote Snyder, a Republican, in a letter accompanying the filing.

Detroit's creditors are expected to face huge losses, and the future of retiree pension and health benefits for thousands of city workers hangs in the balance.

Anticipating the filing on Thursday, investors drove prices of Detroit bonds and notes lower, sending their yields to record highs on Thursday.

In some respects, Detroit's legacy as a model for American innovation is at stake as well. Its crippled condition threatens to overwhelm its image as the home of Henry Ford's pioneering assembly line and Motown's 1960s soul-music hit machine. More recently, the city has become an incubator for efforts to repopulate and reinvigorate an urban relic of a bygone, industrial age.

New York, Cleveland and Philadelphia previously teetered on bankruptcy, but Detroit is the first major U.S. city to go over the edge.

Detroit has lost 25 percent of its population in the last decade, with just 700,000 residents remaining. The ranks of retirees outnumber the city's active workers by more than a 2-1 ratio. With a quarter of its buildings abandoned in some neighbourhoods, no other American city has borne the brunt of deindustrialization so heavily.

In his July 16 letter to the governor making the case for a bankruptcy filing, Orr laid bare the scope of the city's decline.

"After decades of fiscal mismanagement; plummeting population, employment and revenues; decaying City infrastructure... Detroit today is a shell of the thriving metropolis that it once was," Orr wrote.

WHITE HOUSE MONITORING

Snyder named Orr in March to tackle the city's spiralling long-term debt, which is estimated at $18.5 billion.

A White House spokeswoman said Democratic U.S. President Barack Obama and his senior team were monitoring the situation in Detroit closely. But unlike after the economic collapse of 2008, in which the federal government injected billions in cash into U.S. auto makers General Motors Co and Chrysler as the first step of a quick turn through a managed bankruptcy process, Obama made no promises this time.

"While leaders on the ground in Michigan and the city's creditors understand that they must find a solution to Detroit's serious financial challenge, we remain committed to continuing our strong partnership with Detroit...," White House spokeswoman Amy Brundage said.

Now the city's name has become synonymous with decline, decay and crime. A population that peaked at 1.8 million in the 1950s has fallen steadily since then. Manufacturing job losses and an exodus of white residents to the suburbs, which accelerated after race riots in the 1960s, have left huge swaths of this 80 percent black city blighted and crime-ridden.

Pay cuts and job reductions in the city's police and fire departments have added to the sense of insecurity. Budget cuts have left streetlights broken, fire hydrants out of order, and cop cars and fire trucks badly in need of repair.

The city's murder rate is at its highest in nearly 40 years; only a third of Detroit's ambulances were in service in the first quarter of 2013; and an estimated 5,000 buildings a year intentionally are set on fire.

To compound the challenges, a crime wave in city government has compromised efforts to recover. In just one high-profile case, former Mayor Kwame Kilpatrick sits in prison, after he and associates were convicted of public corruption and systematic bid rigging.

The private sector has sought to make inroads against the crushing problems. Quicken Loans founder Dan Gilbert in 2010 began moving more than 7,000 jobs downtown, and several Detroit-based foundations have begun targeted investment in small local firms, neighbourhoods and public schools.

But despite high taxes, the city's coffers have continued to dwindle.

In June, the city's emergency manager, Orr, presented a proposal to creditors offering them pennies on the dollar. His plan had met with resistance from some creditors, most notably Detroit's two pension funds representing retired city workers. The funds recently filed lawsuits in a state court challenging the governor's ability to authorize Orr to file for bankruptcy.

LONG ROAD AHEAD

Creditors are expected to mount a stiff challenge to the bankruptcy, which was filed in the U.S. Bankruptcy Court in the Eastern District of Michigan.

Douglas Bernstein, a bankruptcy attorney at Plunkett Cooney in the Detroit suburb of Bloomfield Hills, said he expected the case would last one to three years and would be very costly.

"This could run to tens-of-millions to hundreds-of-millions of dollars," he said.

Orr has said previously that he hoped Detroit could emerge from bankruptcy in a year or less. During a press conference in Detroit on Thursday after the bankruptcy filing, he said he hoped Detroit would emerge from bankruptcy by late summer or fall in 2014.

"We are planning to get through this process as expeditiously as possible," said Orr, an experienced bankruptcy lawyer before he took the emergency manager job.

Corporate bankruptcy filings with far less at stake have taken much longer than Orr's targeted timeline. Richard Ciccarone, managing director of McDonnell Investment Management, said it would be a long, drawn out process.

"They're dealing with very difficult issues in which there's not very much court precedent for a major city in this arena," he said.

While thousands of companies have gone through bankruptcy and emerged intact, only a relative handful American cities have made Chapter 9 filings since the Bankruptcy Act was amended in 1934 to include municipalities. The paucity of precedent and sheer number of creditors portend a complicated road ahead.

"It's a very complex landscape and it's one that's going to be watched very closely by municipal investors," said Robert Amodeo, a portfolio manager at Western Asset in New York.

General Motors, the only major U.S. automaker headquartered in Detroit, said in a statement that the company "is proud to call Detroit home and...(this is) a day that we and others hoped would not come. We believe, however, that today also can mark a clean start for the city."

Ford Motor Co , which is based in the Detroit suburb of Dearborn, said it was "optimistic that governmental leaders will be successful in strengthening the community."

But Ed McNeil, chief negotiator for a coalition of 33 unions that represent most of the service workers for the city of Detroit said the bankruptcy filing was about "busting the unions."

"I've said all along that this is a power grab," said McNeil. "This is not about fixing the city's finances. It's about the governor and his own agenda to take over the city of Detroit."

(Additional reporting by Bernie Woodall, Deepa Seetharaman, Joseph Lichterman Paul Lienert in Detroit; Karen Pierog in Chicago and Roberta Rampton in Washington; Editing by Leslie Gevirtz and Lisa Shumaker)

The city of Detroit files for bankruptcy
7/19/2013 3:14:00 AM

NEW YORK (Reuters) - The city of Detroit filed for bankruptcy on Thursday, making it the largest-ever municipal bankruptcy in U.S. history and marking a new low for a city that was the cradle of the U.S. automotive industry.

In a letter accompanying the filing, Michigan's Governor Rick Snyder said he had approved a request from Detroit Emergency Manager Kevyn Orr to file for Chapter 9 bankruptcy protection saying "it is clear that the financial emergency in Detroit cannot be successfully addressed outside of such a filing, and it is the only reasonable alternative that is available.

COMMENTS:

NATIONAL LEAGUE OF CITIES:

"We are disappointment that Detroit has to file for bankruptcy today. This is not unexpected, but is unfortunate for the residents and businesses of the community.

"While the city's eligibility for bankruptcy protection still needs to be approved, bankruptcy offers the city a chance to restructure its debt to find a sustainable path forward. We can only hope that all parties will come to quick agreement.

"NLC research has shown that cities nationally are better off financially than they were just several years ago. Detroit should not be seen as emblematic of cities or as a harbinger of what's to come.

MICHELLE KNIGHT, MANAGING DIRECTOR OF FIXED INCOME AT SILVER BRIDGE ADVISORS:

"This announcement has been anticipated but still the harsh reality of it is a blow to the market, especially one trying to come back from a sharp rise in rates. I think it was also jarring to see Chicago experience a three notch credit rating downgrade yesterday.

"Are these once great American cities representative of the credit fundamentals of the entire municipal market? Not at all. If there are disruptions in the pricing of the municipal market as a whole, I expect they will be short-term.

ASSURED GUARANTY:

"Despite the City's bankruptcy filing, Assured Guaranty is prepared to work with the Emergency Manager, Governor and other capital markets creditors on achieving a fair and equitable resolution for all parties.

"As always, investors that hold bonds insured by Assured Guaranty can be certain that they will continue to receive uninterrupted full and timely payment of principal and interest"

LEE SAUNDERS, PRESIDENT OF THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES:

"Governor Snyder's plan to suspend democracy, drive one of America's largest cities into bankruptcy and deprive workers of their hard-earned retirement security, moved dangerously closer to reality today when without a single negotiation with unions, workers or retirees, Snyder authorized Detroit's financial manager to file for bankruptcy.

"Despite assurances from Snyder's hand-picked financial manager Kevyn Orr that AFSCME would have ample opportunity to discuss alternatives, they unilaterally embarked on this treacherous path without meaningful input from those who would be most affected.

"It's no secret why Orr and Snyder are in such a hurry: a Michigan court is scheduled on Monday to decide whether Orr and Snyder are using bankruptcy as a backdoor around the state constitution's protection of pension benefits. Clearly, the Governor and the financial manager are eager to sacrifice the well-being of tens of thousands of workers and retirees, in violation of Michigan's state constitution.

MOODY'S INVESTORS SERVICE:

"Detroit (Caa3/review for downgrade) filed a petition for relief under Chapter 9 of the U.S. Bankruptcy Code, a credit negative event given the additional uncertainty it creates for bondholders of various security types.

"The bankruptcy filing follows closely on the heels of the city's first debt payment default on June 13 on pension certificates of participation, and if the city's eligibility for filing is granted by the federal court, the bankruptcy is likely to interrupt payment on the city's general obligation and limited tax bonds and potentially other debt security types.

"While we expect the water revenue bonds, sewer revenue bonds and distributable state aid bonds not to be subject to the automatic stay, and the treatment of those bonds in bankruptcy remains untested."

PETER HAYES, WHO HEADS BLACKROCK'S MUNICIPAL BONDS GROUP:

"While the Chapter 9 filing by Detroit was expected, the timing was surprising and apparently accelerated by a lawsuit filed today by pensioners.

"The negotiations from here are likely to be long and complex, offering no resolution or clarity perhaps for years. Ultimately, it's important for market participants to understand that Detroit is the exception and not the rule. This is first and foremost a Michigan issue, not a systemic municipal market issue."

JIM SPIOTTO, PARTNER AT CHAPMAN AND CUTLER LLP IN CHICAGO:

"It is historical in the sense that no larger city of a state has ever filed for municipal bankruptcy even though they have had problems like New York City in '75, Cleveland in '78, Philadelphia in 1991. They found other ways of addressing the problem, refinancing their debt, lowering their costs, increasing their tax revenues, and providing essential services at an acceptable level to their citizens.

"One, two or three don't make a trend. What we really have to think about is the reason why all the other cities choice not to do it. The real question isn't just can you go in, because you can go in if you're authorized and you choose to do so.

"The question is what affect does it have on you going forward, especially when you come out and you go to the market and seek to borrow money, as any major city needs to do, is there going to be a penalty, a cost, because you have declared that you, at least at one time, were not able to manage your affairs.

TOM METZOLD, CO-DIRECTOR OF MUNICIPAL INVESTMENTS AT EATON VANCE MANAGEMENT:

"More than anything, it's actually a relief, because they can now get negotiations done and validated under the auspices of a court."

CHRIS MIER, CHIEF MUNICIPAL STRATEGIST, LOOP CAPITAL:

"I don't think this an event that has a impact on the overall market. It is very well anticipated, I don't think anybody was caught by surprise here.

"I don't (think it could be a precedent) and the reason is it is a third standard deviation event, it is so incredibly unusual for a city of that size to go into a sixty-year tailspin and ultimately arrive at a point where it has to file bankruptcy that I don't expect it to ever be replicated.

"Detroit was the fourth largest city in the country for all of the 1920s, 30s and 40s, and now they have lost more than half of their population. I looked at the list of the top 25 cities now and I can't think of one that is even close to that kind of situation."

ROBERT GORDON, A CLARK HILL ATTORNEY REPRESENTING THE RETIREMENT SYSTEMS OF THE CITY OF DETROIT:

"At a meeting with creditors on July 11, Orr said that the mere filing of a Chapter 9 petition doesn't preclude parties from continuing negotiations thereafter.

"This position appears to ignore the bankruptcy's code requirement that a municipality engage in robust, good-faith negotiations before seeking Chapter 9 relief. While the Retirement Systems look forward to such negotiations, these have not yet occurred."

DAN HECKMAN, SENIOR FIXED INCOME STRATEGIST FOR U.S. BANK WEALTH MANAGEMENT:

"To us, it doesn't come as any kind of shock. We believe that there was very limited flexibility for the city other than to file for bankruptcy. It was clear probably several weeks ago that many of the creditors were not willing to accept the severe and dramatic cuts."

"If there's any negative impact on the muni market it will be localized, whether it's Detroit or weaker credits within Michigan."

"We don't think that this proves there's a systematic problem in the muni market itself. Fundamentals have been improving.

"You don't throw the baby out with the bathwater in this market just because Detroit filed for bankruptcy. I think that would be a major mistake for investors."

AMY BRUNDAGE, WHITE HOUSE SPOKESWOMAN:

JACK ABLIN, CHIEF INVESTMENT OFFICER, BMO PRIVATE BANK IN CHICAGO:

"It's not a huge surprise but now the question is how they will move forward and this could be kind of a precedent for other municipalities. Anyone concerned about some other cities like Chicago, cities in California, what this could do is accelerate a trend where states begin to withdraw their support for cities in an effort sure up their finances and we could potentially see more fillings, not on the same scale of Detroit, but certainly some other ones coming out of the woodwork.

"To me the muni market is kind of like real estate, there are thousands of issues and they are all pretty issue specific so it hasn't really tarnished my view of munis collectively.

RICHARD LARKIN, DIRECTOR OF CREDIT ANALYSIS AT HJ SIMS:

"I've said it before: I think bankruptcy was the original goal of Emergency Manager Kevin Orr from before the day he was hired. This bankruptcy isn't pre-packaged; it's premeditated."

"I have been projecting that Detroit would go in bankruptcy since January 2011 so I am not surprised if they file for bankruptcy.

"I saw this coming but I am surprised by the lack of participation by the state of Michigan in trying to solve the city's problems. Detroit getting into trouble? Not a surprise. State of Michigan not coming to help? It is a big surprise, and I think I am not the only one to say that. In the past Michigan had a good reputation of a state helping out its localities when they were in difficulties. Not just Detroit, but other cities as well. But this time it seems they are washing their hands out of Detroit and investors will remember that.

"Do I expect a major impact sending shockwaves and seeing prices falling and yields spiking? No I do not because most people had expected it and (a bankruptcy) is already priced in the market, but I could be wrong. I firmly believe, however, that investors will begin exacting a premium from any borrower that has Michigan's name on it, and from this point, Detroit's name in the muni market is probably mud."

ROBERT AMODEO, PORTFOLIO MANAGER AT WESTERN ASSET IN NEW YORK:

"You'd like to hope that it is isolated. This should not come as a surprise to the market place. You'd like to think that the prices already reflect this distress but we'll see tomorrow. It's a little too late to see.

"We will see tomorrow morning. It is an important case in terms of treatment of different kinds of debt, secured vs unsecured, pension obligations and so forth. It's a very complex landscape and it's one that's going to be watched very closely by municipal investors."

RICHARD CICCARONE, MANAGING DIRECTOR OF MCDONNELL INVESTMENT MANAGEMENT:

Despite recent statements by emergency manager Kevyn Orr that he hoped to resolve any bankruptcy filing in less than a year, "it's going to be a long, drawn out process".

"I just don't see that happening. They're dealing with very difficult issues in which there's not very much court precedent for a major city in this arena."

"Detroit is not reflective of all cities in the country.

"This one was anticipated as a possibility for years, even before the credit crisis occurred. It was only the political support of the state which was helping keep them out earlier. They were on life support. I think Michigan had a difficult decision to make here. They had to deal with an issue in which you have such a dramatic decline in your population base… That's a humongous challenge."

(On the market) "It does provide some trembling and consternation."

"The biggest U.S. municipal bankruptcy ever filed comes at a time when the market for municipal bonds is already shaky. Outflows from municipal bond funds have been high.

"When you put a credit event together with outflows, you increase the initial risk until it works itself out. Everybody will go through a sorting out process."

"The real tremble to the bond market would be if the courts undo the secured general obligation."

ADAM BERGONZI, MBIA's NATIONAL CHIEF RISK OFFICER:

"While the Chapter 9 bankruptcy filing is unfortunate, National's insured bondholders will receive their scheduled interest and principal payments on time and in full.

"Prior to the filing, we submitted a constructive proposal to provide the City with significant debt service relief, long-term savings and continued access to the capital markets. We have had a number of discussions with Orr's team and will continue to work with him, the City and the State towards a mutually beneficial solution to Detroit's many challenges.

MARKET REACTION: On the municipal bond market, Detroit bonds and notes traded on Thursday at record high yields, said Dominic Vonella at Municipal Market Data, a unit of Thomson Reuters.

The taxable June 15 2035 bonds traded at $38.5 with a yield of 16 percent. That compares with $76 and a yield of 8.39 percent in mid May.

(Americas Economics and Markets Desk; +1-646 223-6300)

The city of Detroit files for bankruptcy
7/19/2013 3:14:00 AM

COMMENTS:

NATIONAL LEAGUE OF CITIES:

"We are disappointment that Detroit has to file for bankruptcy today. This is not unexpected, but is unfortunate for the residents and businesses of the community.

MICHELLE KNIGHT, MANAGING DIRECTOR OF FIXED INCOME AT SILVER BRIDGE ADVISORS:

ASSURED GUARANTY:

"As always, investors that hold bonds insured by Assured Guaranty can be certain that they will continue to receive uninterrupted full and timely payment of principal and interest"

LEE SAUNDERS, PRESIDENT OF THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES:

MOODY'S INVESTORS SERVICE:

PETER HAYES, WHO HEADS BLACKROCK'S MUNICIPAL BONDS GROUP:

"While the Chapter 9 filing by Detroit was expected, the timing was surprising and apparently accelerated by a lawsuit filed today by pensioners.

JIM SPIOTTO, PARTNER AT CHAPMAN AND CUTLER LLP IN CHICAGO:

TOM METZOLD, CO-DIRECTOR OF MUNICIPAL INVESTMENTS AT EATON VANCE MANAGEMENT:

"More than anything, it's actually a relief, because they can now get negotiations done and validated under the auspices of a court."

CHRIS MIER, CHIEF MUNICIPAL STRATEGIST, LOOP CAPITAL:

"I don't think this an event that has a impact on the overall market. It is very well anticipated, I don't think anybody was caught by surprise here.

ROBERT GORDON, A CLARK HILL ATTORNEY REPRESENTING THE RETIREMENT SYSTEMS OF THE CITY OF DETROIT:

"At a meeting with creditors on July 11, Orr said that the mere filing of a Chapter 9 petition doesn't preclude parties from continuing negotiations thereafter.

DAN HECKMAN, SENIOR FIXED INCOME STRATEGIST FOR U.S. BANK WEALTH MANAGEMENT:

"If there's any negative impact on the muni market it will be localized, whether it's Detroit or weaker credits within Michigan."

"We don't think that this proves there's a systematic problem in the muni market itself. Fundamentals have been improving.

"You don't throw the baby out with the bathwater in this market just because Detroit filed for bankruptcy. I think that would be a major mistake for investors."

AMY BRUNDAGE, WHITE HOUSE SPOKESWOMAN:

JACK ABLIN, CHIEF INVESTMENT OFFICER, BMO PRIVATE BANK IN CHICAGO:

"To me the muni market is kind of like real estate, there are thousands of issues and they are all pretty issue specific so it hasn't really tarnished my view of munis collectively.

RICHARD LARKIN, DIRECTOR OF CREDIT ANALYSIS AT HJ SIMS:

"I've said it before: I think bankruptcy was the original goal of Emergency Manager Kevin Orr from before the day he was hired. This bankruptcy isn't pre-packaged; it's premeditated."

"I have been projecting that Detroit would go in bankruptcy since January 2011 so I am not surprised if they file for bankruptcy.

ROBERT AMODEO, PORTFOLIO MANAGER AT WESTERN ASSET IN NEW YORK:

RICHARD CICCARONE, MANAGING DIRECTOR OF MCDONNELL INVESTMENT MANAGEMENT:

Despite recent statements by emergency manager Kevyn Orr that he hoped to resolve any bankruptcy filing in less than a year, "it's going to be a long, drawn out process".

"I just don't see that happening. They're dealing with very difficult issues in which there's not very much court precedent for a major city in this arena."

"Detroit is not reflective of all cities in the country.

(On the market) "It does provide some trembling and consternation."

"The biggest U.S. municipal bankruptcy ever filed comes at a time when the market for municipal bonds is already shaky. Outflows from municipal bond funds have been high.

"When you put a credit event together with outflows, you increase the initial risk until it works itself out. Everybody will go through a sorting out process."

"The real tremble to the bond market would be if the courts undo the secured general obligation."

ADAM BERGONZI, MBIA's NATIONAL CHIEF RISK OFFICER:

"While the Chapter 9 bankruptcy filing is unfortunate, National's insured bondholders will receive their scheduled interest and principal payments on time and in full.

MARKET REACTION: On the municipal bond market, Detroit bonds and notes traded on Thursday at record high yields, said Dominic Vonella at Municipal Market Data, a unit of Thomson Reuters.

The taxable June 15 2035 bonds traded at $38.5 with a yield of 16 percent. That compares with $76 and a yield of 8.39 percent in mid May.

(Americas Economics and Markets Desk; +1-646 223-6300)

Factbox - Detroit bankruptcy was years in the making
7/19/2013 3:14:00 AM

(Reuters) - The long decline of Detroit, a hollowed-out relic that once was hub for the U.S. automotive industry, led on Thursday to the biggest U.S. municipal bankruptcy filing in the country's history.

Here are some facts Kevyn Orr, the emergency manager who has been running Detroit since March, and Governor Rick Snyder cited for leading to the city's bankruptcy filing:

-Detroit, which saw its population drop from 1.8 million in 1950 to less than 700,000 by 2012, is drowning under more than $18 billion in debt.

-City tax rates are at legal limits and expenditures have exceeded revenue for six years. Property taxes were delinquent on 47 percent of the city's taxable properties in 2011.

-The accumulated budget deficit, which totalled $326.6 million at the end of fiscal 2012, is projected to climb to more than $1.3 billion by fiscal 2017 absent structural changes.

-Detroit has long relied on borrowing and deferred payments to its pension funds to keep afloat.

-The city's unemployment rate, which stood at 18.3 percent in June 2012, has nearly tripled since 2000.

-The murder rate is at its highest level in nearly 40 years and it takes police an average of nearly an hour to respond to calls. The national average is 11 minutes.

-In the first quarter of 2013, only a third of the city's ambulances were working and about 40 percent of Detroit's street lights were not working.

-Negotiated settlements on city debt are not possible outside of bankruptcy "given the vast and fragmented pool of potential creditors," Orr's letter stated. That pool includes city retirees, labour unions, bondholders and bond insurers.

(Reporting by Karen Pierog in Chicago; Editing by Lisa Shumaker)