TBTF Muni New York City Got Bailed Out By the Federal Government in 1975! (Videos and Research)

Here is some interesting TBTF muni history for you. In 1975, New York City couldn't pay its bills or access the bond market and, similar to the too big to fail banks in 2008, was eventually bailed out by the federal government because of systemic risk. NYC actually had its own end-of-2008 moment when former President Gerald R. Ford, in a speech given on 10/29/1975 to the National Press Club, said he was "prepared to veto any bill that has as its purpose a Federal bailout of New York City to prevent a default" (source). But he finally caved and signed a bill on 12/15/1975 (the 'New York City Seasonal Financing Act') which extended NYC up to $2.3 billion in short-term loans to prevent it from defaulting on its debt. State aid couldn't save the city alone. The first CBS News video shows former NYC Mayor Abe Beame (and 15 other mayors) asking congress for a bailout. Since banks were shutting down NYC's access to the bond market, which was funding its budget deficit, other cities were worried that contagion would spread in the municipal bond market.

NYU associate professor and historian Kim Phillips-Fein gave a speech on New York City's fiscal crisis a few months ago at CUNY. She also wrote an article in The Nation in April 2013 titled "The Legacy of the 1970s Fiscal Crisis" ("Nearly forty years after Ford told New York to drop dead, the city is still here—but forever changed").

So was NYC's bailout in 1975 the muni equivalent of today's TBTF bank and eurozone sovereign debt bailouts? It also seems like NYC was the Detroit of the 1970s (NYC's tax base - its housing and manufacturing - fled to the suburbs while the economy was tanking).

I found a report on NYC's fiscal crisis by the California Research Bureau (Roger Dunstan). Read the full doc below via the California State Library (library.ca.gov).

"Overview of New York City’s Fiscal Crisis
Prepared by
Roger Dunstan
California Research Bureau, California State Library
New York City faced a significant fiscal crisis and almost defaulted in 1975. It was a true crisis because the nation’s largest city had literally run out of money and could not pay for normal operating expenses. Timely state and federal action saved the city from defaulting on its obligations and possible bankruptcy. At the time, New York City and its subdivisions had $14 billion of debt outstanding of which almost $6 billion was short-term. The city admitted to an operating deficit of at least $600 million, although honest accounting techniques put it at more like $2.2 billion and the city found itself shut out from credit markets."

More reads:

A State Saves A City: The New York Case (Duke Law, pdf)
New York City 1975-1981: The Granddaddy of Muni Distressed Credit (HJSims, 2012)
In Bleak ’70s, Salvo of Protest (NYT, 2012)
Fiscal crisis in 1975 taught New York hard lessons of chopping, freezing that are handy now (NY Daily News, 2009)
Infamous ‘Drop Dead’ Was Never Said by Ford (NYT, 2006)
When the City’s Bankruptcy Was Just a Few Words Away (NYT, 2006)
Gotham’s fiscal crisis: lessons unlearned (National Affairs via Manhattan Institute, 2002, pdf)
Recalling New York at the Brink of Bankruptcy (NYT, 2002)
From 1975 to Now, How's New York City Doing? (NYT, 1983)
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