(steady music) - Judge Jerry Rosen, we are now 10 years out of the Detroit bankruptcy.

You mediated that process.

As you look at where Detroit is now compared to where it was back then, how are we doing as a city post-bankruptcy?

- You know, Nolan, it's very gratifying to see you remember well where we were on July 18th, 2013 at 4:06 PM when the petition was filed, petition for bankruptcy was filed.

Detroit was flat broke, services weren't being provided, garbage wasn't being picked up, snow wasn't being plowed.

Detroit's credit rating was at the very bottom.

It could possibly be junk status and falling.

The streetlights were out, 150,000 blighted homes and properties.

I could go on and on.

- Yeah.

- You remember where we are.

Look where we are now.

I think that in the bankruptcy, we were able to build the foundation and construct the scaffolding for Detroit's recovery.

And of course, Mike Duggan has taken it from there, and he's really done a remarkable job in bringing the city back.

- So what we don't normally think of bankruptcy as a positive thing is, I know at the time, I and a lot of others were writing that, and this could be really the end of Detroit or really put Detroit in a very, very bad place.

Why didn't that happen?

Why did it turn out so much better than we predicted?

- You know, with the perspective of 10 years, here's how I feel about it.

When I was going through it, trying to get this deal and that deal and put the Grand Bargain together, it was head down and get to the finish line because all of us knew that time was Detroit's enemy.

If this bankruptcy went on for years of entrenched litigation and warfare, there'd be nothing left of Detroit but dusted legal bills.

So we were all committed to getting through it as quickly and expeditiously as possible.

And I think we had a unique confluence.

In the book, I call it Detroit's Big Bang Theory - [Nolan] Yeah.

- of people and events coming together to rescue a great city.

- Mm-hm.

- But people were committed.

And also, we had people like Governor Snyder who had the political will to make the difficult decisions, first to put the city into bankruptcy, and then to make the difficult decisions when we were in bankruptcy on how to prioritize the issues to help ensure Detroit's recovery.

- Well the book is the "Grand Bargain: The Inside Story of Detroit's Dramatic Journey from Bankruptcy to Rebirth".

Talk to me about the title, the "Grand Bargain".

What was the Grand Bargain?

- So the Grand Bargain was actually a three-legged stool.

And the idea, which I doodled on a cardboard backing of a legal pad, and amazingly, quite almost miraculously, that piece of cardboard is now hanging in the Detroit Institute of Arts as the solution to the largest municipal bankruptcy in history.

But the Grand Bargain, the idea was to take the art at the DIA, the art collection, which was really the city's only real asset.

- And the creditors wanted at that asset, right?

- They did.

They wanted to liquidate it.

In fact, one of the creditors hired an appraiser who came up with a plan to carve up the Diego Rivera murals, carve 'em up and sell 'em off piecemeal.

- So the art was at risk at the DIA, but also the pensions of city retirees.

- The pensions.

- And the Grand Bargain that you put together to doodled out, as you say, save both.

How did it work and what were the elements?

- So when we started, I realized the city had no real assets other than the art.

And I also knew that the retirees, Kevin or the emergency manager, was threatening 35 to 40% cuts to the pensions of the civilian and uniformed retirees.

And that would've been a disaster.

So I began to think of the bankruptcy as bookended by, on the one hand, the art as the only asset, and on the other hand, the retirees as the largest single group of creditors, but also, there were political implications, racial implications.

You may recall that many people were saying that the art was the preserve of the wealthy suburbs, and why not just sell it and everything will be fine.

I thought that was a terrible idea for many reasons, not the least of which was Detroit had been cannibalizing its heritage to mortgage its future for decades.

And where had it gotten us?

If we had liquidated one of the great artistic treasures in the world, and I should parenthetically add last year and this year, the museum was chosen as the number one art museum in the country.

But if we had liquidated the museum, I felt like it would be the exclamation point on Detroit's obituary.

- Jerry, what was the third leg of the stool?

- So the three legs were the state's $350 million commitment, $380 million from the foundation, and the third leg of the stool was the DIA itself.

We all felt, certainly the state, the governor, legislators, and even the foundations were contributing, felt that the DIA had to have some skin in the game to preserve the air.

- Can you talk about that story in the book, and you call it the most expensive breakfast, perhaps in history.

The putting together of the deal to get the DIA board to put in their contribution.

What did that take?

- We'd gotten the commitment from the state, we'd gotten the commitments from the foundations, but both the state and the foundations were requiring to, as they put it, requiring the DIA to have some skin in the game.

So I gently started negotiated with Gene Gargaro, who was the chair of the board of the DIA at the time.

And initially, we first got 'em up to about $50 million.

It was very painful 'cause they were under some stress financially.

First got 'em up to 50 million, and I knew that probably wasn't gonna be enough.

So I called Governor Snyder and I told him that we'd had a soft commitment of 50 million from the DIA.

And he said, "Well, you know, I'm gonna be getting an award from a group called the Americans for Art in Washington at the end of the month."

I'm gonna invite Gene to go with me and I'll talk to him.

So he did, the night before he went to Washington, I got a call from the governor.

You know, my Blackberry lit up and he said, "Guess what I've been doing for the last couple of hours?"

I said, "I don't know Rick.

What?"

He said, "I've got the DIA's," remember he's a CPA.

- Yeah.

- He said, "I've got the DIA's audited financials.

I can see how we can save him 5 to $6 million a year."

I said, "Great.

What are you gonna do with that, Rick?"

He said, "I'm gonna ask Gene for $100 million dollars tomorrow."

I said, "Rick, get the award first."

- And so they had breakfast, and then - They had breakfast in Washington.

- the commitment was made.

Now you have the money coming in from the various sources.

You've got the retirees on board for the sacrifice they'd have to make.

Then you had to take this to the creditors.

And you talk in the book about a deal with the creditors that came together in a barbershop.

- The haircut at the haircut.

- Haircut at the haircut.

- We needed to get deals with the financial creditors, the folks who had been lending money to the city for decades.

And the pension debt was extraordinary, over $9 billion in pension debt altogether.

And we had to get deals with the financial creditors to be able to get everybody on board.

And the first deal we got was with a group of the, it's called the UTGOs, unlimited tax general obligation bonds.

And we'd been negotiating with 'em for about three or four months, not making much progress.

And I needed a haircut.

I looked like Bozo the Clown.

- Mm-hm.

- And we were having a session and I said, "I'm going over to get a haircut."

And Dave Hyman, the lead lawyer for the city, and Tim Coleman, who was the lead financial guy for the bond folks, said, "You know, we need a haircut too."

So I called Frankie, my Italian barber.

I said, "I'm bringing a couple friends over."

Went over there, I got the governor on the line on my Blackberry, told him that we were having a negotiation, and he gave us all a pep talk.

And in about two and a half hours, we put together the outlines of the first deal that we had with a financial creditor.

It turned out to be a very important mark in the bankruptcy because once we got our first deal with that financial creditor, we were able to leverage that and get a deal with the next one, and then the next one, the next one.

You guys in the media began calling it the Grand Bargain Express.

And I started telling the creditors that, you know, a bankruptcy is like a train waiting at the station.

- So you've been involved in a lot of cases over your career as a federal judge in Detroit.

And talk about how unique and how remarkable this process was in your experience.

All bankruptcies, all legal cases don't go this well or turn out this well.

- Well, remember, I was a judge.

I was actually the chief judge of our court.

And when you're deciding cases, you're the decider.

In the bankruptcy, Steve Rhodes was the decider, and he did an immaculate job of presiding.

But being the mediator, my job was to get deals.

And I quickly realized that we had to get deals so that Detroit could be able to move forward to the other side of the bankruptcy.

And this was much different than deciding cases, even high-profile cases that I've had because this was persuasion rather than, you know, knocking the gavel down and ruling.

- And it's all in this book.

Jerry Rosen, we thank you for being with us today.