Graham Amendment Would Ban Bailout of Detroit or Any Other City

Sen. Lindsey Graham (R-S.C.) today introduced an amendment to the FY 2014 Financial Services and General Government Appropriations Act to make sure that the federal government doesn’t bail out municipalities.

The move comes after Detroit filed for bankruptcy.

“Should the federal government bail out Detroit?” asked Graham. “No way. No how. There is no doubt Detroit has huge problems, but they are facing problems of their own making. Detroit and other municipalities facing these issues need to get their own financial houses in order.”

White House press secretary Jay Carney said Tuesday it’s “a matter of course that this administration will, you know, work with Detroit and talk about policy ideas and engage with Detroit and other cities to provide the kinds of assistance that can help Detroit continue to move forward.”

Carney insisted such assistance is “absolutely not” a bailout.

“And the kind of assistance that we have provided to cities that — in terms of, you know, creating investment opportunities or dealing with blighted neighborhoods, I mean, that’s the kind of assistance that we’ve been providing through different programs since the Great Recession was in full bloom,” he said. “And we’ve provided enormous amount of assistance to urban areas across the country to deal with some of the problems that were, if not created, greatly exacerbated by the Great Recession.”

Graham’s amendment says “no federal funds may be used to purchase or guarantee any asset or obligation of any municipal, local, or county government if that locality has defaulted, is at risk of defaulting, or likely to default absent such federal assistance.”

It also prohibits the federal government from issuing lines of credit or providing direct or indirect financial aid to prevent bankruptcy.

“The federal government is beyond broke. The last thing we need is the broke bailing out the broke. Taking on financial obligations which can be handled at the state and local level is a very bad idea,” Graham said.

“In South Carolina both our state government and localities have faced several lean budget years,” he added. “They were forced to make tough, painful decisions which were not easy. But they faced up to the challenges and did what was necessary. Other states and localities should do likewise.”