Word: default
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...basic question was whether the Federal Government would act to prevent default-and if so, how and when. The question involved many factors: the way the rest of the country feels about New York; its reputation as the very symbol of lavish welfare spending; excessive expectations and inept management. Much of the country believes that New York is simply asking hard-working Americans hundreds of miles away to go bail for the city's profligacy. Many New Yorkers in turn believe that much of their trouble has been imposed on them by the country, through welfare legislation and Great Society...
Obviously, New York is a victim of both outside events and a massive misrule that started long before Mayor Abraham Beame came to of fice. It is so far gone that reform may no longer be possible without serious social unrest. Yet the immediate problem is what its default might do to the rest of the country. Shock waves from the city's financial collapse could hurt the national and perhaps even the world economies...
...state of New York, having reluctantly moved to lend money to the city, was itself in serious trouble. New York City and state bonds account for about 19% of the $200 billion state and municipal notes and bonds in circulation. As a result, a double default could well undermine investors' confidence in the market, causing them to shun the bonds of many other cities, states, counties and local authorities, imperiling their ability to borrow money. That could lead to their defaults too, and more business failures and higher unemployment. The nation's economic recovery could be set back, and overseas...
...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 of default of the proportions we are facing clearly make it the lesser of two evils...
...Ford Administration has opposed federal help, arguing that the effects of a default would be short-lived and limited. Administration officials contend that some 75 banks around the country hold New York City debt equal to 50% or more of their net worth, and only about half of them would be in serious danger if the city defaulted. The Federal Reserve Board has promised to make loans to tide these banks over in case of a default. Last week, however, there were some signs that the Administration might be wavering. Vice President Nelson Rockefeller recommended that Congress consider creating...