It was an extra-legal process: there was no way that the Articles of Confederation could put themselves out of business, nor even start a process to write a new Constitution. It was just done; everyone knew that it was being done; the new Constitutionalists went out of their way to make a process of writing and ratification that would give the new government legitimacy.
One of the driving forces for the process was the fact that the various states had borrowed money from wealthy people, debts which it appeared that those states could not pay back. They borrowed the money in part to finance the Revolutionary War.
One of the powers of the new Federal government was that it absorbed the unpaid debts of the various states. The states were relieved of those debts and the Federal government paid them back, or paid interest on those bonds for the profit of the creditors. It was one of the reasons why the states liked the new Constitution, and it was one of the reasons why the wealthy appreciated the new Federal government.
You might ask why this is relevant today. It is relevant because one of the first and most important powers of the Federal government under the Constitution was to absorb the unpayable debts of lower levels of government.
We are now in a great crisis because the city of Detroit owes, it is estimated by the creditors, 18.5 billion dollars. A good chunk of that is owed to retired city workers, who get an average payment of $1900 per month. All serious and reasonable people who comment on the problems of Detroit agree that this $1900 per month is an outrageous looting of the public treasury and must be reduced. Especially if the banker creditors of Detroit are to be protected. This is manifestly unjust.
Eighteen billion dollars is a lot of money for a city. For the Federal government, it is slightly more than a rounding error. It is estimated that the US government lost $60 billion, much of it in cash, in the reconstruction of Iraq. The federal government ought to guarantee the full payment of the pensions of Detroit city workers.
What happened to the American auto industry between 1965 and the present is a huge and complex story, a historic culmination of several epochal transformations: the rise and fall of mass industrial production and industrial unions, the developing globalization of heavy manufacturing, the emerging dominance of financial capital over industrial capital, the great migration of African Americans from the South to the industrial centers of the North, the transformation of the African American people from an agricultural people to an industrial proletariate, the collision of the Civil Rights movement with industrial unionism, the racial transformation of Northern cities through white flight. the rise and fall of the ethnically white big city machines and their replacement with African American political power. The result was the disinvestment in and the depopulation of the city of Detroit, once America's most prosperous city. All of the processes of American history in the 20th Century finally come down to a broke city government, trying to pay the pensions of its retired city workers, who are left holding the bag, for a set of processes bigger than any decision maker to have controlled.
The feds need to make this right for those pensioners.