Prior cases in Central Falls, Rhode Island and Vallejo, California treated bondholders carefully. They still needed to maintain access to the the bond markets for short and long-term funding. But the bankruptcy of Jefferson County, Alabama, where bondholders are taking between 20 and 85 percent haircuts, has changed the rules for municipal bondholders. Now the blood has begun to flow. ...

The process of restructuring [Detroit's] liabilities began with the bankruptcy filing today. It may last up to two years and involve a lot of litigation. New precedents about the treatment of bondholders, swaps counterparties, employees and pensioners will likely be developed. Conflicts will arise between the Michigan Constitution and federal bankruptcy law. The fights and protests may be vicious.