Word: rohatyn
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...want people 50 or 100 years from now to look back and say that we here, today, sat back and allowed this city to die?" That question was posed last week by Investment Banker Felix Rohatyn as he and other defenders of New York's fiscal integrity fought their most desperate battle so far to keep the city from defaulting. Such a default could have potentially grave consequences for many other city governments. Against the odds, Rohatyn & Co. appeared to be prevailing−temporarily. A plan patched together by Governor Hugh Carey and the Municipal Assistance Corporation...
...arrange a schedule for deferred payment of all its debts. If the schedule is accepted by the state supreme court and followed in good faith, creditors' suits would be rejected. Carey's proposal to raise $2 billion or so seemed to be the lesser evil. Said Rohatyn, who played a key role in selling the package to Albany's legislators: "I told them I was bringing them essentially a rotten choice. They were being asked to choose between a default−a known, unquestionable, terrible catastrophe right now−and a complicated long shot carrying...
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...
...Emergency Financial Control Board, the surrogate mayor of New York City. Assuming that the $2 billion financial package holds up, the board will have three months in which to devise a program that can start to put the city on a sound financial basis. If the board succeeds, Rohatyn is hopeful the Federal Government at last may lend some land of support to Big Mac bonds−a guarantee if the paper is subject to federal taxation. New York, in effect, has a new government with a more decisive politician, Hugh Carey, at its head. It is probably the city...
...expected to ratify the agreement, however grudgingly. In the case of the police and firemen, the city may have to add some sweeteners to break down their resistance. Gotbaum, who describes the negotiations as the toughest he has ever witnessed, declared: "The workers are identifying with the city." Banker Rohatyn left the sessions with heightened respect for the men who sat across the table from him and only rarely pounded on it. "What impressed me most about those guys," he said, "was that they were very serious, not histrionic...