(Originally published by the Daily News on October 30, 1975. This story was written by Frank Van Riper.)
WASHINTON, Oct. 29 (News Bureau) – President Ford declared flatly today that he would veto any bill calling for “a federal bail-out of New York City” and instead proposed legislation that would make it easier for the city to go into bankruptcy.
In a speech before the National Press Club, Ford coupled repeated attacks on the city’s fiscal management with a promise that, if default came, the federal government would see to it that “essential public services for the people of New York City” would be maintained.
White House officials said privately, however, that Ford had no intention of committing federal money to maintain such services. They also conceded that as defined by the Ford administration, “essential services” may not include public schooling.
The ferocity of Ford’s attack on the city’s spending – he likened it to an “insidious disease” – appeared to doom chances for passage of any congressional plan to help New York avert default through federal loan guarantees.
“I can tell you now that I am prepared to veto any bill that has as its purpose a federal bailout of New York City to prevent a default,” the President said.
He sought to minimize the effect of such a default on the rest of the country and accused unnamed officials – presumably Mayor Beame and Gov. Carey – of indulging in “fiction and fearmongering … (to) frighten the American people and their representatives in Congress into panicky support of patently bad policey.”
Questioned after his speech, Ford said that he was still not convinced that the city will have to default. He said the city still has the “capacity to prevent default through additional budget cuts and more taxes.
The Dow Slumps
Beame and Carey reacted bitterly to Ford’s remarks and the Dow-Jones industrial index fell 12.83 points in trading on the New York Stock Exchange.
Beane accused Ford of “writing off New York City in one speech” and insisted that there were remedies available in the Congress at “no cost to the American taxpayer.”
Carey said that the consequences of default to other cities and states would be “far grimmer than Mr. Ford’s complacent words suggest,” and that Ford probably was motivated by political considerations.
“Sufficient Authority”
Ford said that his proposed revision of the federal bankruptcy law would provide “the federal courts with sufficient authority to preside over an orderly reorganization of New York City’s financial affairs – should that become necessary.”
However, Chairman William Proxmire (D-Wis.), whose Senate Banking committee plans to vote on a proposed $4 billion loan guarantee plan for the city tomorrow, said that Ford had chosen “a course that would shove New York into tin-cup status and onto the federal government’s back for years.” Sen. Jacob K. Javits (R-N.Y.) agreed, saying that Ford’s plan was a “grave error.”
Sen. James L. Buckley (R-C-N.Y.) and most other Senate Republicans backed Ford’s program as the only prudent way to force the city back into sound fiscal share. New York “must face the reality that it no longer has the resources to meet its obligations.”
Chairman Henry S. Reuss (D-Wis.) of the House Banking Committee said that by “inviting public bankruptcy” the President had endangered 200 small banks around the country that “are loaded with New York City paper.” After a late-afternoon committee meeting, Reuss said tentative plans were to report out help New York bill by Friday.
A New Chapter
Under the Ford plan, the city, with state approval, would file a bankruptcy petition under a proposed new Chapter 16 of the federal bankruptcy act. In order to take such action, the city would first have to state that it is unable to pay its maturing debts as well as present “a program for placing the fiscal affairs to the city on a sound basis.”
The federal court then would be authorized to accept jurisdiction over the case, Ford said, resulting in “an automatic stay of suits by creditors so that the essential functions of New York City would not be disrupted. “
“Hard Measures”
“I don’t want anybody misled,” Ford warned. “This proposed legislation will not, by itself, put the affairs of New York City in order. Some hard measures must be taken by the officials of New York City and New York State. They must either increase revenues of cut expenditures of eevise some combination that will bring them into a sound financial position.”
White House officials said that the Ford plan should be passed “as quickly as possible,” particularly since the city’s default deadline has now been moved up from Dec. 1 to mid-November.
They said that President’s plan to revise the bankruptcy laws would apply only to New York City (and other strapped cities with a population of a million or more), but not to New York State. Gov. Carey has warned repeatedly that if the city is forced into default, the state may default shortly thereafter.
Despite Ford’s contention that the federal government would “work with the courts” after default to see that there are “policemen on the beat, firemen in the station and nurses in the emergency rooms,” the officials noted that the administration “does not anticipate” that federal money will be used to apy for the continuation of these services. L. William Seidman, Ford’s top economic adviser, was asked if the administration included the city’s schools among “essential services.”
“No,” Seidman responded. He refused to elaborate.
During his 35-minute speech, which was televised in New York City only, and in a brief question period that followed. Ford made no mention of the steps New York has taken to cut expenditures and raise revenues. Nor did he discuss the stringent restraints that would be imposed upon the city and state as preconditions to any of the federal loan-guarantee plans now before the House and Senate Banking committees.
Instead, Ford argued that such guarantees would give the federal government an improper role in local affairs as well as provide “immediate rewards and eventual rescue to every other city that follows the tragic example of our largest city.”
“When New York City now asks the rest of the country to guarantee its bills, it can be no surprise that many other Americans ask why,” Ford said.
“Why, they ask, should they support advantages in New York that they have not been able to afford for their own communities?
“Why, they ask, should all the working people of this country be forced to rescue those who bankrolled New York City’s policies for so long – the large investors and big banks?”
Without calling for specific changes or cutbacks, Ford noted that “New York City’s wages and salaries are the highest in the United States.” He cited the $15,000 annual salary paid sanitation workers after three years. National surveys have shown, however, that this is the only category in which New York pays top dollar. Other cities were shown to pay higher salaries than New York to their policemen, firemen and teachers.
