‘Drop Dead’ Is Not an Option

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New York was on the verge of bankruptcy, and President Ford (who never actually said “drop dead”) had made it clear, after listening to conservative hard-liners both inside and outside of his administration, that he planned to veto any federal rescue plan.

It was yet another case of the worshippers of abstract economic notions (let the markets run their infallible courses) ignoring the potential consequences of their smug certainties.

Felix Rohatyn, the financier who played such a large role in the city’s economic recovery, has told me many times of the economic summit near Paris in November 1975 in which President Valéry Giscard d’Estaing of France and Chancellor Helmut Schmidt of West Germany explained to Mr. Ford that allowing New York to go bankrupt might well light the fuse to an international financial crisis and would foster the idea that America itself was no longer creditworthy.

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Date published: Nov 15, 2008

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