I wrote this last night as I was on a flight from Nashville to NYC, having just finished Nathan Bomey’s Detroit Resurrected. As earlier promised, now that I’ve read the entire book, I’m doing a review. I will likely do a later review for publication in an actuarial newsletter, but that will have a different take.
AMAZINGLY FAIR BOOK, THICK ON DETAILS
Nathan Bomey created a compelling narrative out of the bankruptcy workout of Detroit, lasting from July 2013 to December 2014. One expects an epic fight from the largest municipal bankruptcy ever (so far), but what I came across was unexpected – a fast-paced narrative detailing the major players, and most importantly, letting those players explain themselves.
(An aside: for the prim, I will warn there’s a lot of “NYC language” coming from particular players. It’s not Games-of-Thrones bad; after all, nobody gets killed (SPOILER ALERT!), no sexy romps, and definitely a dearth of direwolves. But yes, plenty of strong opinions uttered using vulgarities.)
It was so refreshing to see the narrative played out where there are no real villains except some hazy groups (like a hapless City Council) and the definitely-named Kwame Kilpatrick. But he’s off-stage by the beginning of the book, being bundled off to federal prison, along with some of his cronies. But even the biggest losers in the deal, bond insurers FGIC and Syncora, get their say. They’re not made out to be eeeeevil Wall Street players, but players representing their own interests and making their own claims for fairness. The only Detroit institution leaving unscathed in the deal was the art museum, DIA. One gets to hear of the sense of betrayal by all the players, within and without Detroit, without their particular pain being mocked.
The book has plenty of conflict, surprising alliances, and a few interesting twists at the end (which cleared up some mysteries to me at the time.) I thought the pacing was really well-done, and Bomey did a good job of explaining salient technical points, like present value, relatively quickly and enough detail for the lay reader to understand. Excellent book for the general public. It will also be a great study for law and business schools for people learning about negotiation in high stakes situations that seem like zero sum.
If Bomey takes this level of detail and even-handedness to all his journalistic work, as well as the storytelling ability, he will go far in journalism.
NOW FOR THE QUIBBLES
Okay, that’s the Amazon-appropriate review above. I’m copy/pasting that sucker into Amazon, slapping a 5-star rating on the book, and leaving it at that there. What I have to say below is of interest to only a few niches: professional writers/editors and the numbers nerds.
NOT THE BOOK I HAD EXPECTED
Let me take the second group first (after all, they’re my native clan.) I was really waiting for more numerical context in the book. Of interest to me in the whole bankruptcy is how it does, or doesn’t, balance out. As I went through the book, Bomey threw in numbers like seasoning, using some stats multiple times. (Yes, Nathan, I remember that you said 40% of the streetlights didn’t work. I got the point the first time.)
The problem I had is that this is supposed to be a workout in a bankruptcy. It’s kind of important to note that one specific thing being bitched about is 0.1% of the debt they’re trying to wipe out. That’s kind of important.
I realized, the farther along I went, that this book is not about the numbers. The numbers are just the McGuffin. You notice none of the numbers people are quoted. It’s mainly lawyers talking and some executives of foundations as well as politicians. Yes, Gov. Snyder and Judge Rhodes have quantitative backgrounds, but those don’t come up except in the capsule bios Bomey writes of them.
There’s a reason for that.
This may seem a sidenote, but here are a few paragraphs from the book. It’s the only time actuaries are mentioned:
What’s more, actuarial assessments for pension funds are part mathematical science, part fortune-telling. Actuaries try to predict the future by applying formulas to project investment returns and mortality rates among pension holders. This allows employers to estimate their pension costs. But actuarial methods involve a surprising amount of guesswork, sprinkled with a heavy dose of worldview.
What is a reasonable rate of return to expect on your investments? Anyone with an online investment account knows that past performance isn’t an indicator of future results. Responsible families, businesses, and governmental entities project conservative rates of return to avoid shortfalls when the stock market doesn’t perform well. In 2014, the top 100 publicly traded U.S. companies with pension plans projected annual rates of return of 7.3 percent, according to actuarial firm Milliman.
In Detroit, Orr’s team concluded that by projecting average annual investment-return rates of 7.9 percent and 8 percent, the two pension funds had made their collective shortfall look a lot smaller than it really was. Why? The higher the assumed rate of return, the less money governments have to contribute to keep their pension funds healthy. With an expectation of high rates, there’s an assumption that investment increases will be sufficient to meet future pension obligations. This offers governments little incentive to accurately report the health of their pension funds. By simply maintaining an artificially high projected rate of return, they can lower their annual costs and spend money on other priorities.
Like many other pension funds, Detroit’s pension boards also used a polarizing actuarial technique called “smoothing” to spread out investment losses over a long period of time, instead of recognizing the losses immediately. The smoothing process—an actuarial form of lessening the impact of underperforming investments—further masked the seriousness of the pension shortfall in Detroit and allowed the pension boards to obscure the consequences of irresponsible investments.
Some of this is not entirely accurate, but that’s an unimportant quibble.
SETTING UP EXPECTATIONS
Because the book isn’t about the numbers. At all.
It is about the deal-making, the relationships between the people, and working through a bad situation where everybody (except DIA) have to give up something, and in many of the cases all parties (including DIA this time) have a stake in Detroit coming out stronger in the future.
Thing is. I think the numbers are important. Because Detroit can achieve the hoped-for growth, and still be pulled down by pension promises that may not have been cut enough. I don’t think Detroit will be heading back to bankruptcy court soon, where I mean within the next decade… and the main reason will be Michigan continuing to keep things going until it can’t support it. A lot of people have a lot at stake in these deals working, at least in the short term (remember, less than 10 years is short-term to me.)
But that said, I think Bomey did a great job getting everybody’s side, and I think he really fairly portrayed how each side felt, not just in their quotes, but also in explaining some of the concepts of why, for example, the bond insurers felt like they were being treated unfairly. And I was happy to find out what the deal was that the bond insurers ultimately made, because I didn’t know that.
The great thing for Bomey is that if I were a potential interview subject for him in the future, and I had read this book, I would say “Wow, that’s extremely fair reporting.” I have been through a wringer before with journalists quoting me improperly or taking my quote out of context, because they had their own narrative in mind. Bomey steps back quite a bit, and lets the players explain their motivations. No casting aspersions on the motivations of his one-the-record sources.
I think it’s sad that I was so taken aback by such even-handed treatment, because it’s so rare in journalism. Too many journalists feel like they’re there to comment on proceedings, rather than explain technical concepts, events, actions, and report what the actors say. I wrote all over this book as I went along, because I feel like doing that with my physical book now. Often the word BULLSHIT is written in the margin, and it’s not because of something Bomey conveyed, but reacting to the point-of-view of one of the players. Well, I remember saying BULLSHIT back in the day as well.
Example notes from me:
Anyway, there are more books to be written on the Detroit bankruptcy, I feel, and Bomey staked out a particular piece of it, a sizeable chunk of it that’s not my bailiwick. Good for him. He did it very well.
BITCHING ABOUT EDITORS
That said, I saw some issues in how he was edited. You might think that I would be blaming Bomey for the following, but seriously, the editor is the one who is supposed to catch this shit, and in some of the cases I have an inkling that the editor told Bomey to put certain things in there, because it just doesn’t jibe with the heart of the book.
Before I rip into the editor, let me give props to the copyeditor, which is not what I’m talking about. There were no real issues with the copy in terms of spelling, grammar, punctuation, etc. That all read fine. Even a few clunky sentences that could have been cleaned up by the copyeditor (or editor)… eh, it happens. It’s a first book, and this was an incredibly detailed job. It’s a very clean copy in that respect. The Harry Potter books at the end of the series had more copyedit flubs than this book.
So one of my issues: not consistent in checking on repetition of info. Repeating information in a book is not necessarily a failure… indeed, my main problem was when information should have been repeated, and wasn’t. The biggest issue was with the use of referring to people’s names. This book has a lot of players. There are a handful that go through the whole book, with the most important being Emergency Manager Kevyn Orr, Michigan Governor Rick Snyder, Bankruptcy Judge Steve Rhodes, and behind-the-scenes mediator Gerald Rosen. (These four are the heroes of the story, though Rosen and Orr are the biggest heroes, with Snyder and Rhodes a little more at a distance). One can keep up with four main characters.
But I just went through the index (great index, btw. Yay to the indexer). I counted the names, excluding the ones that need no explanation, like President Obama or Pablo Picasso (neither of whom figure directly in the tale). And just people’s names, not names of the many organizations and companies that pop up in the book.
One hundred forty-seven named people, many of whom appear on multiple pages.
Even GRRM knows you’ve got to explain a bit if the character leaves for a chapter and comes back… but more to the point, there’s a journalistic approach of referring to a quoted person just by their last name (I’m fine with that), but I found myself paging back three pages to find the last reference to the speaker….and sometimes even then there’s no explanation as to their role. A few of the players, they’re named, but I have no clue what they’re doing there. I understand what they’re saying, and it’s relevant, but are they just some random buddy or are they representing somebody in particular? You don’t want the reader flipping back to the index to find the person’s name to see that the role is explained 3 chapters later. This isn’t a mystery novel.
Anyway, the editor should have come up with some text smoothing there to improve readability.
The next thing is a little more unforgivable in an otherwise solid book: the tacked-on smarmy ending. While Bomey is very fair in telling the story, a few biases bubble through (and no, I’m not referring to how he “explains” actuarial work.) But it’s momentary, he moves on, etc.
But a steaming pile of viewpoint is dropped in the final chapter from Bomey himself, not from any of the bankruptcy players. It’s jarring and it doesn’t fit with how he’s shown ideas in the rest of the book. It doesn’t really connect to anything else. It feels like it was forcibly dropped into the chapter because Big Important Book needs to have Big Important Ponderings or something. It could have been excised with no damage to the book.
Also, I have an inkling, given how out-of-place it was, that the editor may have asked Bomey to put that crap in there. Sure, a writer can always say no, but this guy is relatively young and it’s his first book (says the person who has to her name only specialty publications, like the Maple Handbook for Third Semester Calculus for use by NCSU.)
There are loads of ways the book could have ended, and he got most of what I expected in there… but added some stuff that I thought didn’t fit with the rest of the book. Bomey makes some comments about whether Detroit really is resurrected (oh yeah, the title really doesn’t represent the book well, but I suck at naming things, so somebody else should come up with a better title. Like Detroit Workout… but better than that. Because it’s more Detroit Pruned than Detroit Resurrected.
Okay, whatever. But it’s the editor’s job to help put a good title on the book. There is no actual revitalization at the end of the book. There is just the cutting away of some obligations, plus some influx of funds with some promised oversight from the state.
But the point is that it wasn’t totally a fresh start. Some obligations are still hanging on the city. As noted in an earlier post, the Detroit Public Schools were separate from all this…. And they’re not in the best of shape, beyond dismal education. Their financial picture is ugly. Then there are a few ongoing lawsuits, but I haven’t checked their status lately. I believe the deals made as recounted in the book will hold for now.
And the DB pensions still exist. They’ve not been wrapped up in a captive insurer, like a life insurance company does when it cuts off a line of business and tries to manage what we call a run-off block. When the insurer does that, it has the capital and reserves to back that business (and hopes no additional capital) and then it can walk away from worrying about it. But even with pensions cut, there is still an unfunded amount. I haven’t looked at the recent numbers, and there should have been at least one actuarial valuation since the bankruptcy closed….
My flight is over [when I finished writing… and I’m too tired to add], so I’ll leave it here. I’m going to think about this for a while.
On Dreams of Bankruptcy
Self-Driving Cars: Won't Anybody Think of the Poor Revenue-Hungry Governments?
Public Pensions Watch: Detroit Deal - the Basics