Financial History Issue 128 (Winter 2019) | Page 22
FEAR CITY
New York on the
Verge of Default
By Kim Phillips-Fein
20 FINANCIAL HISTORY | Winter 2019 | www.MoAF.org
At 12:25 in the morning on Friday, Octo-
ber 17, 1975, an aide for New York City
Mayor Abraham Beame placed a desperate
telephone call to President Gerald Ford.
He was not permitted to wake the sleeping
President, though the mayor’s office had
serious news. That day, New York City
had debt of nearly $453 million coming
due, and it had only $34 million on hand.
Without immediate access to more money,
the city would be forced into default.
As the day dawned, reports on what
was about to happen in New York spread
around the world. Currency trading
nearly halted in Europe; the price of gold
climbed; the Dow Jones plummeted. Doz-
ens of people who owned city bonds lined
up in the Municipal Building early in the
morning, clutching notes they wanted to
redeem; they were turned away and told
to come back later on.
For most New Yorkers, life that day
went on as usual. The trains ran, people
went to work, the streetlamps turned off as
the sun came up. But for those who knew
what was happening, it was as though the
city was about to enter a strange new land,
where nothing could be taken for granted
any longer.
The previous evening, the city’s eco-
nomic and political leadership had been
gathered at the political pageant known
as the Alfred E. Smith Memorial Dinner,
held every year at the Waldorf-Astoria
Hotel in Midtown.
This formal assemblage to raise money
for Catholic charities had begun in 1945 in
honor of Alfred Smith, the 1920s governor
of New York State and the first Catholic
presidential candidate. The fiercely anti-
Communist Archbishop Francis J. Spell-
man organized the first gathering the
year after Smith died. The dinners quickly
became a “ritual of American politics,” to
New York City Mayor Abe Beame holds up a copy
of the famous New York Daily News front page
headline, “Ford to City: Drop Dead,” published
on October 30, 1975.