Wednesday, January 23, 2008

Very interesting update on the New York City Bailout during the 1970s

via Stephen Dubner:

I was fascinated by Felix Rohatyn’s story about global leaders urging President Gerald Ford not to let New York go bankrupt in the 1970s (”City to Big Mac: So long,” BTW, Nov. 19). I have another story, one I’ve kept to myself for over 25 years. I was in the middle of this effort, as assistant to Mayor Abe Beame and director of New York’s Washington office. As such, I helped lead the effort to obtain loan guarantees. One night I was in the office of the late Senator William Proxmire (D-Wis.) [then chair of the Senate Banking Committee] along with New York State lobbyists. Proxmire was on the phone with Chicago Mayor Richard J. Daley (the current mayor’s father) and motioned for us not to let on we were there.

After Proxmire hung up, he told us Chicago banks were pushing to let New York go bankrupt in order to hurt the city’s “money center” banks. In those days, banking was not national, and New York and Chicago were in feverish competition. Proxmire told us Daley would publicly support loan guarantees but not help much behind the scenes.

The senator asked us not to tell anyone about this, not even Beame or Governor Hugh Carey, since it would only hurt getting federal assistance. Ford’s stance against New York was bewildering to me, since a former New York governor, Nelson Rockefeller, was Vice-President. Ford’s stance played a role in his losing to Jimmy Carter, whom I joined in the White House as a Deputy Assistant.

Bruce Kirschenbaum

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