Word: default
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...mounting crisis. In the bunker atmosphere of city hall, one die-hard loyalist muttered that Carey and his aides were out to "destroy" the mayor. But the Board of Estimate, the city's principal governing body, decided reluctantly to support the Carey plan as the only alternative to default. In the end, after winning some token concessions from Carey, Beame gave...
Voluntary Bankruptcy. At the other extreme, some experts argued that a default was not only inevitable but might be therapeutic. In a lead editorial, The Wall Street Journal urged the city to declare voluntary bankruptcy. That, said the Journal, would enable New York to make orderly payments to creditors and rewrite its laws and contracts to reduce its chokingly generous payments for municipal wages, pensions, welfare and other services...
...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...
...many influential Congressmen from outside New York were beginning to worry about the impact a default would have on their home districts. A number of them−Senate Majority Leader Mike Mansfield, House Speaker Carl Albert, House Banking Committee Chairman Henry Reuss−began calling for some additional long-term federal help for all cities. A main reason was that New York's agony has made it costlier and tougher for many other cities to raise money from investors...
Jumping Turnstiles. For New York, says Rohatyn, default would probably mean "a business exodus and, more generally, a draining away of vitality." Businessmen who own New York bonds and use them as collateral for loans would have a hard time renewing their loans. Bankers who have underwritten the city's bonds and notes might be hit by lawsuits from investors, claiming that the underwriters should have known and disclosed the true financial condition of New York. Worried about the city's future, more and more corporations might abandon the nation's biggest headquarters town...