Low Plaza

Felix Rohatyn Addresses City's Fiscal Crisis in Annual M. Moran Weston Lecture

By Katie Moore

Felix Rohatyn

Felix G. Rohatyn, former U.S. ambassador to France and former chair of New York's Municipal Assistance Corporation (MAC), compared New York's 1970s fiscal crisis with the one the city faces today at a lecture sponsored by the School of International and Public Affairs on Feb. 26.

Rohatyn, who managed negotiations in the 1970s enabling New York to resolve its severe budget short-fall, drew parallels between banking systems, debt structure and the key players of both periods. New York of 1975, he explained, "was really a tale of two cities," as the liberal, media capital of the U.S., with both tremendous wealth as well as severe poverty. "We were very concerned back then about the effect of city bankruptcy on public assistance programs -- everything from healthcare to education to housing," said Rohatyn.

In the 1970s, he added, the city had no ready access to credit. In fact, New York created MAC in the 70s to issue bonds backed by a dedicated portion of the city's sales tax. Rohatyn also suggested 70s city planners lacked accuracy and transparency in accounting methods which made it difficult to navigate the crisis. He discussed the role of the governor's office in strongly supporting New York's financial viability. "Bankruptcy to Hugh Carey was plainly unacceptable," said Rohatyn.

As opposed to our system today, 30 years ago banks were in the hands of a few financiers who were committed to finding solutions to the city's economic problems. For these city powerbrokers, heavily invested in the community, New York's financial ruin would have been devastating. Overseas, European governments feared New York's insolvency could have negative repercussions for international financial markets. Talks with the unions were especially tense. Concerns about looming layoffs and tapped pension funds dominated negotiations. The White House's involvement also was elevated. Rohatyn confirmed President Gerald Ford's threat in the mid-1970s to veto a federal bailout plan for the city "cost him the election."

Today, some things have changed, and others haven't. "In 1975," joked Rohatyn, "Alan Greenspan was Chair of the President's Council of Economic Advisors, Donald Rumsfeld was Secretary of Defense, and Dick Cheney was White House Chief of Staff."

But there are some vital differences. New York's financial institutions today -- Morgan Stanley and Citigroup -- are "multinationals more interested in Argentina's emerging market, than in New York's [stability and potential,]" said Rohatyn.

New York today also boasts strong accounting methods and sound debt standing, with the option of floating bonds in international markets. Rohatyn also has high praise for New York's new mayor, Michael Bloomberg, a man he calls "financially sophisticated" and in tune with real situation of the city's 2003 financial crisis and budget deficit.

Rohatyn, invited by SIPA to give this year's M. Moran Weston II Distinguished Lecture in Urban and Public Policy, currently serves as president of Rohatyn Associates LLC, a firm that provides financial advice to corporations. He was former managing director of the investment banking firm Lazard Freres & Co. and a member of the Board of Governors of the New York Stock Exchange from 1968 to 1972. The Ambassador also served on the Board of Directors of several NYSE listed corporations.

SIPA created the Weston lecture to bring public leaders to the School to discuss important domestic issues -- from expanding home ownership to the changing economic base of cities. The series is named for the late Weston, the University's first African-American Trustee and the founder of the nation's largest black-owned financial institution. Franklin D. Raines, chief executive officer of Fannie Mae, and Andrew Cuomo, former U.S. secretary of Housing and Urban Development, are former speakers. This year, the Rohatyn talk drew more than 100 students.

Published: Mar 31, 2003
Last modified: Mar 28, 2003

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