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DETROIT (AP) — At the height of its industrial power, Detroit was an irrepressible engine of the American economy, offering well-paying jobs, a gateway to the middle class for generations of autoworkers and affordable vehicles that put the world on wheels.

But by Thursday, the once-mighty symbol of the nation's manufacturing strength had fallen into financial ruin, becoming the biggest U.S. city ever to file for bankruptcy — the result of a long, slow decline in population and auto manufacturing.

Although the filing had been feared for months, the path that lay ahead was still uncertain. Bankruptcy could mean laying off employees, selling off assets, raising fees and scaling back basic services such as trash collection and snow plowing, which have already been slashed.

Kevin Frederick, an admissions representative for a local career training school, called the step "an embarrassment."

"I guess we have to take a couple of steps backward to move forward," Frederick said.

Now city and state leaders must confront the challenge of rebuilding Detroit's broken budget in as little as a year.

Kevyn Orr, a bankruptcy expert hired by the state in March to stop Detroit's fiscal free-fall, said Detroit would continue to pay its bills and employees.

But, said Michael Sweet, a bankruptcy attorney in Fox-Rothschild's San Francisco office, "they don't have to pay anyone they don't want to. And no one can sue them."

The city's woes have piled up for generations. In the 1950s, its population grew to 1.8 million people, many of whom were lured by plentiful, well-paying auto jobs. Later that decade, Detroit began to decline as developers started building suburbs that lured away workers and businesses.

Then beginning in the late 1960s, auto companies began opening plants in other cities. Property values and tax revenue fell, and police couldn't control crime. In later years, the rise of autos imported from Japan started to cut the size of the U.S. auto industry.

By the time the auto industry melted down in 2009, only a few factories from GM and Chrysler were left. GM is the only one with headquarters in Detroit, though it has huge research and testing centers with thousands of jobs outside the city.

Detroit lost a quarter-million residents between 2000 and 2010. Today, the population struggles to stay above 700,000.

The result is a metropolis where whole neighborhoods are practically deserted and basic services cut off in places. Looming over the crumbling landscape is a budget deficit believed to be more than $380 million and long-term debt that could be as much as $20 billion.

In recent months, the city has relied on state-backed bond money to meet payroll for its 10,000 employees.

Orr made the filing in federal bankruptcy court under Chapter 9, the bankruptcy system for cities and counties.

He was unable to persuade a host of creditors, unions and pension boards to take pennies on the dollar to help with the city's massive financial restructuring. If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.

Orr said Thursday that he "bent over backward" to work with creditors, rejecting criticism that he was too rigid. "Anybody who takes that position just hasn't been listening."

The bankruptcy could last through summer or fall 2014, which coincides with the end of Orr's 18-month appointment, he said.

Gov. Rick Snyder, who called bankruptcy the "one feasible path," determined earlier this year that Detroit was in a financial emergency and without a plan for improvement. He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr.

Creditors and public servants "deserve to know what promises the city can and will keep," Snyder wrote in a letter that was part of the filing. "The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations."

A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his tenure in Detroit that bankruptcy was a road he preferred to avoid.

Some city workers and retirement systems filed lawsuits to prevent Snyder from approving Orr's bankruptcy request, said Detroit-area turnaround specialist James McTevia.

They have argued that bankruptcy could change pension and retiree benefits, which are guaranteed under state law.

Others are concerned that a bankrupt Detroit will cause businesses large and small to reconsider their operations in the city. But General Motors does not anticipate any impact to its daily operations, the automaker said Thursday in a statement.

Detroit has more than double the population of the Northern California community of Stockton, Calif., which until Detroit had been the largest U.S. city ever to file for bankruptcy when it did so in June 2012.

Before Detroit, the largest municipal bankruptcy filing had involved Jefferson County, Ala., which was more than $4 billion in debt when it filed in 2011. Another recent city to have filed for bankruptcy was San Bernardino, Calif., which took that route in August 2012 after learning it had a $46 million deficit.
NEW YORK (AP) — General Electric posted a slight gain in net income in the second quarter and said its U.S. operations are picking up steam.

GE said Friday that it earned $3.13 billion, up from $3.11 billion a year earlier. On a per share basis, the company earned 30 cents, up from 29 cents. Revenue fell 4 percent, to $35.12 billion from $36.5 billion.

Adjusted to reflect earnings from continuing operations, GE earned 36 cents per share. That's 2 cents less than adjusted earnings last year, but one cent better than analysts polled by FactSet had expected. GE shares rose 40 cents, or 1.7 percent, to $24.03 in trading before the market opened.

GE, based in Fairfield, Conn., has a broad view of the global economy because it sells a wide variety of industrial equipment and appliances around the world, including jet engines, medical diagnostic equipment, locomotives, washing machines, natural gas-fired turbines, and oil and gas drilling equipment.

CEO Jeff Immelt said orders in the U.S. showed "strong growth," an improvement from recent quarters when he expressed caution about the U.S. market. Immelt said emerging markets remained strong and that Europe has stabilized, but remained weak.

The company's orders for new business rose $7 billion last quarter to a record $223 billion. Immelt said he expects profits to grow in the second half of the year.

GE is in the midst of transforming itself in to a company more focused on industrial businesses. It's been shedding media and other non-industrial divisions and shrinking its banking division. Infrastructure orders rose 4 percent and profit margins for industrial segments rose 0.5 percent. GE Capital earnings fell 9 percent.

Christian Mayes, an analyst at Edward Jones, called the quarter "ho-hum" but noticed some encouraging signs for GE. Revenue slipped at the company's power and water division, which sells and services gas-fired turbines, wind turbines, and water treatment equipment, but the division's profits returned to more normal levels after a terrible first quarter.

He was also encouraged by the improved outlook for the U.S., echoing recent comments by other industrial companies, and by GE's push to further improve profit margins later this year.

"The back half of the year should be better for GE," he said.

____ Follow Jonathan Fahey on Twitter at http://twitter.com/JonathanFahey .
WASHINGTON (AP) — As Congress scrambles to pull back a messy student loan increase, it raises the question: Why did Uncle Sam get into the college loan business, anyway?

The short answer: Because the Russians launched Sputnik.

A look at the 55-year history of federal student loans:

___

Americans got a shock from the sky in October 1957.

The first artificial satellite was passing overhead. And it wasn't just man-made, it was Soviet-made.

Beach ball-sized Sputnik touched off a space race and stoked big fears that American students might not be up to the challenges of the Cold War.

Calls to improve science and technical education led to creation of a low-interest college loan program in the National Defense Education Act of 1958. The loan dollars came directly from the government.

___ Then came Lyndon Johnson's "war on poverty."

Student loans got a boost in 1965 as part of the president's "Great Society" initiatives. The Higher Education Act expanded loans as well as grants to help needy students. It also changed the way the federal loan program was financed. Instead of using government money, the loans would be made by bankers. But the government guaranteed that if students defaulted, the U.S. would cover the tab.

Lawmakers liked that approach because outstanding loans wouldn't show up on the government's books as red ink.

___ And that led to the birth of Sallie Mae.

In 1972, President Richard Nixon spearheaded creation of the Student Loan Marketing Association — known by the nickname Sallie Mae — to help get more money to college students.

Sallie Mae was a government-sponsored entity that used Treasury funds to buy up banks' student loans, freeing up the private lenders' money and encouraging them to make more loans.

Sallie Mae was fully privatized in 2004 and is now a corporate giant of the private student loan and college savings businesses.

___ Taxpayers took the risk; bankers got the rewards.

Using private companies to handle government-backed loans proved to be more complicated and expensive for taxpayers than direct federal loans. So President Bill Clinton sought a switch back to a direct loan system more like the Sputnik days.

But many Republicans opposed direct loans as a government takeover. And private lenders didn't want the feds moving in on their lucrative market. Congress compromised by phasing in some direct federal loans while keeping guarantees in place for the bank loans.

For more than a decade, the banks appeared to be winning the battle with direct loans. Colleges largely decided which kinds of loans to offer their students, and the aggressively marketed private loans were more popular than the lesser-known government alternative.

___ The 2008 financial crisis changed everything.

With chaos on Wall Street and credit markets in a tailspin, private student loan money started drying up. To keep money flowing to college students, Congress gave the Education Department power to step in and buy private loans from lenders.

Meanwhile, with fewer banks offering loans to students, the number of colleges turning to direct federal loans shot up.

The shine was off private lenders.

___ In 2010, Uncle Sam took over.

Private lenders waged an intense lobbying campaign to hang onto the government-backed student loan market. But in the end, Congress approved President Barack Obama's plan to give commercial banks the boot.

Now, the entire federal student loan program belongs to Washington.

Banks and other private lenders still loan money to students on their own, without a federal guarantee. Some students need the outside help to fill in the gaps as college costs keep climbing.

And many people are still paying off student loans they got through private lenders under the old Federal Family Education Loan program before it ended on July 1, 2010.

___ Under today's system, direct federal loans are considered the best deal for students.

The government loans generally have lower interest rates than bank loans. And the feds offer flexible payment options for people who have trouble with their bills after graduation.

Also, students who qualify for subsidized Stafford loans, based on financial need, don't rack up interest charges while they're in school. Students who go into public service careers such as teaching can have their loans forgiven or discounted. And graduates who work in exceptionally low-paying professions stand to have their loans completely forgiven after 25 years.

Students with federal loans are at the mercy of Congress and its bickering, however.

A messy standoff has temporarily doubled interest rates on new subsidized Stafford student loans this summer. But a bipartisan compromise promises to head off that rate hike before students sign up for loans in the fall.

___ Follow Connie Cass on Twitter: http://www.twitter.com/ConnieCass

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