Fitch says Detroit's bankruptcy shows state intervention limits

July 26 Fri Jul 26, 2013 12:25pm EDT

July 26 (Reuters) - Fitch Ratings said on Friday Detroit's bankruptcy filing demonstrates state intervention limits and does not preclude credit deterioration or default.

Although in the case of Pontiac, Michigan where the emergency manager has restructured the city's finances, state monitoring and intervention programs were a positive in a distressed situation.

Emergency managers in Michigan have among the greatest powers of any state intervention mechanism in the country, Fitch said.

"The issue of intervening in distressed local government situations is also getting attention at the federal level as the Senate Appropriations Committee on Thursday approved an amendment (as part of the fiscal year 2014 Financial Services and General Government Appropriations Act) that would generally disallow the government from aiding cities in financial turmoil," the rating agency said in a statement.