Creature From Jekyll Island by G. Edward

Whereas the average large city employed thirty-one people per one-thousand residents, New York had forty nine. That's an excess of fifty-eight per cent. The salaries of these employees far out-stripped those in private industry. While an X-ray technician in a private hospital earned $187 per week, a porter working for the city earned $203. The average bank teller earned $154 per week, but a change maker on the city subway received $212. And municipal fringe benefits were fully twice as generous as those in private industry within the state. On top of this mountainous overhead PROTECTORS OF THE PUBLIC

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were heaped additional costs for free college educations, subsidized housing, free medical care, and endless varieties of welfare programs.

City taxes were greatly inadequate to cover the cost of this utopia. Even after transfer payments from Albany and Washington added state and federal taxes to the take, the outflow continued to exceed the inflow. There were now only three options: increase city taxes, reduce expenses, or go into debt. The choice was never in serious doubt. By 1975, New York had floated so many bonds it had saturated the market and could find no more lenders. Two bill ion dollars of this debt was held by a small group of banks, dominated by Chase Manhattan and Citicorp.

When the payment of interest on these loans finally came to a halt, it was time for serious action. The bankers and the city fathers traveled down the coast to Washington and put their case before Congress. The largest city in the world could not be allowed to go bankrupt, they said. Essential services would be halted and millions of people would be without garbage removal, without transportation, even without police protection. Starvation, disease, and crime would run rampant through the city. It would be a disgrace to America. David Rockefeller at Chase Manhattan persuaded his friend Helmut Schmidt, Chancellor of West Germany, to make a statement to the media that the disastrous situation in New York could trigger an international financial crisis.

Congress, understandably, did not want to turn New York into a zone of anarchy, nor to disgrace America, nor to trigger a world-wide financial panic. So, in December of 1975, it passed a bill authorizing the Treasury to make direct loans to the city up to $2.3

billion, an amount which would more than double the size of its current debt to the banks. Interest payments on the old debt resumed immediately. All of this money, of course, would first have to be borrowed by Congress which was, itself, deeply in debt.

And most of it would be created, directly or indirectly, by the Federal Reserve System. That money would be taken from the taxpayer through the loss of purchasing power called inflation, but at least the banks could be repaid, which is the object of the game.

There were several restrictions attached to this loan, including ari austerity program and a systematic repayment schedule. None

°f these conditions was honored. New York City has continued to be a welfare utopia, and it is unlikely that it will ever get out of debt.

48 THE CREATURE FROM JEKYLL ISLAND

CHRYSLER

By 1978, the Chrysler Corporation was on the verge of bankruptcy. It had rolled over its debt to the banks many times, and the game was nearing an end. In spite of an OPEC oil embargo which had pushed up the cost of gasoline and in spite of the increasing popularity of small-automobile imports, the company had continued to build the traditional gas hog. It was now saddled with a mammoth inventory of unsaleable cars and with a staggering debt which it had acquired to build those cars.

The timing was doubly bad. America was also experiencing

high interest rates which, coupled with fears of U.S. military involvement in Cambodia, had led to a slump in the stock market.

Banks felt the credit crunch keenly and, in one of those rare instances in modern history, the money makers themselves were scouring for money.

Chrysler needed additional cash to stay in business. It was not interested in borrowing just enough to pay the interest on its existing loans. To make the game worth playing, it wanted over a billion dollars in new capital. But, in the prevailing economic environment, the banks were hard pressed to create anything close to that kind of money.

Managers, bankers, and union leaders found common cause in Washington. If one of the largest corporations in America was allowed to fold, think of the hardship to thousands of employees and their families; consider the damage to the economy as shock waves of unemployment move across the country; tremble at the thought of lost competition in the automobile matket, of only two major brands from which to choose instead of three.

Well, could anyone blame Congress for not wanting to plunge innocent families into poverty nor to upend the national economy nor to deny anyone their Constitutional right to freedom-of-choice?