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U.S. Treasury official named lead on Detroit bankruptcy

By Joseph Lichterman

DETROIT (Reuters) - The executive director of President Barack Obama's Council on Jobs and Competitiveness was named on Friday to manage more than $300 million in federal, state and private aid packages given to Detroit, which has filed for bankruptcy.

Gene Sperling, director of the president's National Economic Council, announced the appointment of Don Graves, who is also a deputy assistant secretary at Treasury, during a press conference with Obama administration, state and city officials in Detroit.

The aid package is a far cry from the $80 billion in financing extended to the U.S. auto industry during the 2008-2009 financial crisis that saved General Motors Co and Chrysler Group LLC from collapse.

But the White House has already ruled out a similar bailout for the city of 700,000, a reflection of both a more constrained federal budget and increased infighting in Washington.

"It's no secret that things have never been tighter in Washington," Sperling said, making note of gridlock in Congress and the potential shutdown of the government next week.

Detroit became the largest U.S. city ever to file for bankruptcy a little more than two months ago and reported $18.5 billion in debt. The city, led by Emergency Manager Kevyn Orr, has been unable to provide many basic services to residents.

A large portion of the more than $300 million in aid, which comes from federal, state and private sources, was previously earmarked for Detroit, but delivery of the funds was slowed by red tape and other issues.

"Put the bankruptcy aside, we're talking about reinvestment and revitalization for the city and getting at some long standing issues that everyone has said needs to be gotten at for the better part of at least a decade," Orr told reporters after the meeting.

Orr said the city also plans to revamp the way it manages its federal grants and has hired consultants to improve the process. The White House's chief technology officer and a team is to be sent to Detroit to improve Detroit's outdated IT systems.

Sperling and cabinet officials discussed the proposals in a closed-door meeting at Wayne State University with Orr, Michigan's Republican Governor Rick Snyder, the city's mayor, Dave Bing, and members of the state's congressional delegation.

The Federal Emergency Management Agency pledged to expedite $25 million that will allow the city to hire 150 new firefighters and purchase equipment to prevent and detect arson.

The U.S. Department of Transportation also pledged nearly $140 million to assist the city's transportation system.

(Reporting by Joseph Lichterman; Editing by Gerald E. McCormick, James Dalgleish and Leslie Gevirtz)

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