Detroit, America's most financially distressed big city, may have some problems in common with Harrisburg, Pa., a much smaller city that has also struggled under a heavy debt load, Harrisburg's former receiver said yesterday, Reuters reported. Both cities' financial woes have been caused in part by the segregation of minorities and poor people, David Unkovic, the former receiver, said in a paper presented at a conference about distressed municipalities. Local governments tend to "isolate the poor, including many minorities, in defined political subdivisions where they receive substandard education, substandard services and substandard opportunities," he said. Unkovic also blamed the finance industry for pushing complicated interest rate swaps, swaptions and other derivative products with names like "scoop and toss" onto local governments. Both Harrisburg and Detroit entered into such agreements, to their detriment, he said.
