Word: bailouts
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...financial experts across the country to change their minds about a federal rescue of New York. When members of the American Bankers Association arrived in Manhattan for a convention last week, a New York Times poll found heavy opposition to a federal bailout. But the bankers' resistance softened after speeches on the city's crisis from, among others, Mayor Beame, Carey, Rohatyn and Brenton Harries, president of Standard & Poor's Corp., the investment-research firm. Harries warned that civil disorder might follow a default and added: "As unpalatable as the specter of federal intervention is, the social and economic consequences...
Similarly, Arthur Burns, chairman of the Federal Reserve Board, obliquely suggested that Congress draft a bailout program. He carefully noted to the Joint Economic Committee that the Federal Reserve lacks authority to help New York; only Congress can do that. Somewhat contradictorily, he continued to maintain that "the damage stemming from a prospective default is likely to be short-lived." But under questioning, he hedged and said that a default could trigger a recession. Added Burns: "If I were a member of Congress and a vote were taken today, I'd vote against help for the city. How I would...
...determines to do something." Simon recommended that he be put in charge of a federal bailout "to determine that the city was irrevocably and unalterably on the path to fiscal responsibility before any aid could be given." He added: "Such aid should be so punitive in its terms and so painful that no other city not facing absolute disaster would think of applying for help...
...state had already issued $250 million in notes as part of its share of the bailout scheme. But some of the financiers who handled the deal had been stuck with an estimated $100 million in notes they could not sell. After Levitt's refusal to buy more Big Mac bonds, the bankers told MAC Chairman Rohatyn that they could not sell the remaining $500 million of the state's $750 million share at this time...
...Washington, President Ford met for 45 minutes with Carey and again turned down pleas for any form of federal bailout. Said Treasury Secretary William Simon: We "will do nothing to help the city avoid default or lead it out of bankruptcy." Chairman Arthur Burns reiterated that the Federal Reserve Board would not guarantee the city's bonds and notes to make them marketable. The Fed argues that even if New York City defaults on all its paper, no large bank will fail...