On Friday, when President Obama finally addressed the Trayvon Martin verdict, his remarks were greeted with a chorus of amens, and rightly so. Still, I couldn't help thinking about the race speech he wasn't making. Detroit, America's largest majority-black city since the 1970s, had declared bankruptcy less than 24 hours earlier. It was apparently easier to address one tragic death than to honestly grapple with the misdeeds that had brought low one of the most important cities of the 20th century.

Those misdeeds indisputably include a history of abandonment, neglect, isolation and outright hostility born directly of the racial tensions that have historically divided Detroit from its predominantly white suburbs, and from the rest of the state of Michigan. Add to the list a failure of leadership on every level – from myopic, at times corrupt local politicians who punted on Detroit's long-term debt issues, to a bipartisan Washington policy establishment that has blundered along for years without anything resembling a cohesive urban policy or a strategy for shoring up US manufacturing.

And, of course, let's not forget the economic misdeeds of Detroit's Big Three car manufacturers (those pioneers of job outsourcing) and Wall Street (whose predatory lending and casino mentality resulted in the foreclosure epidemic that would devastate the tax base of cities across the US).The year after Chrysler and General Motors entered managed bankruptcies, Michigan elected a Republican governor, a helmet-haired certified public accountant (and venture capitalist), Rick Snyder, who bankrolled his own campaign to the tune of $6m, proudly billing himself as a technocrat capable of reviving the state's foundering economy. Snyder, after promptly cutting corporate taxes, saw the writing on the wall in Detroit. Nervous about the possibility of an unmanaged bankruptcy – which could have tanked the bond rating and borrowing ability of the entire state – Snyder appointed bankruptcy lawyer Kevyn Orr as Detroit's "emergency manager" in March. Democratically elected officials (the mayor, the city council) retained their job titles but no real power; Orr, meanwhile, would control the city's finances and negotiate with creditors. He was granted near dictatorial powers, including the ability to break union contracts with city workers and sell off municipal assets.

Previously, Orr had been one of the lead attorneys working on Chrysler's managed bankruptcy, and the hope was that he'd bring the same skills to fixing the city. But there was one huge difference: Obama extended $82bn in federal loans to Chrysler and GM. In the city of Detroit, federal loans were a pipe dream, and Orr's chief spokesperson has been reduced to floating the idea of selling off paintings from the city's art museum to pay the bills.

Detroit holds approximately $18bn worth of long-term debt. About half of the money is owed to retired city workers, who were promised health and pension benefits that Detroit can no longer afford. The other half is bond debt – some taking the form of shady interest-rate swaps, owed to the very same Wall Street banks that tanked the global economy in the first place. Orr took a surprisingly tough line with the banks, offering many of the bondholders only 10 cents on the dollar. Predictably, they balked. (At the last moment, they also backed out on Orr's offer to take representatives on a driving tour of Detroit's worst-hit neighbourhoods; most likely their public relations departments realised the image of nervous bankers rolling through Detroit's urban prairies on a chauffeured disaster tour would make for what's known as "bad optics".)

The pensioners, meanwhile, are protected by Michigan's state constitution. According to Orr, though, federal bankruptcy law would supersede that of the state, and he was threatening the pensions with "significant cuts" – so the pension fund lawyers decided to take him to court. This is what directly triggered the bankruptcy filing: now the city has entered bankruptcy, any pending lawsuits are automatically suspended.

What happens next? The truth is, no one knows. The US has never seen a municipal bankruptcy on this scale. It could take years to wend its way through the court system, with much depending on bankruptcy judge Steven Rhodes, appointed on Friday to oversee the case. Rhodes remains a largely unknown quantity, though a Google search revealed, auspiciously, that he plays rhythm guitar in the Indubitable Equivalents, the house classic rock band of the American Bankruptcy Institute, and that he loves the song (seriously) "Eve of Destruction". He's also co-written a book about Ponzi schemes, which should help when it comes to negotiating with Wall Street.

During the 2012 campaign, Obama hammered Mitt Romney for writing an op-ed titled "Let Detroit go bankrupt". The "Detroit" to which Romney referred was the car industry, not the city, and Obama's critique was spot-on – allowing the companies to fail would have been a human and economic catastrophe. But now that the other Detroit has gone bankrupt, perhaps it's time for Obama to write an op-ed of his own, explaining the disgraceful "jobless recovery" he's presided over, while corporate profits continue to soar. The day after the Detroit bankruptcy was announced, incidentally, the Dow Jones industrial average hit a record high.

• This piece was amended on 22 July 2013. The bankruptcy judge Steven Rhodes plays for a band called the Indubitable Equivalents, not the Interminable Equivalents as had been stated in the seventh paragraph.