HOW TO SAVE NEW YORK

What is a citizen of depressed Detroit, booming Houston or bucolic Sauk Centre, Minn., to make of the phenomenon of New York City? A visitor is immediately struck by the signs of New York's unsurpassed wealth: majestic skyscrapers thrusting boldly into the air, great ships busily plying its waters, expensive limousines hurtling down its avenues, well-dressed people rushing along Wall Street, Fifth Avenue and the other storied thoroughfares. These signs of affluence symbolize the city's position as the capital of American finance and commerce. All the more incredible, then, that the New York City government is broke.

Moreover, it became abundantly clear last week that without some form of emergency federal assistance, New York will go into default by Christmas and quite possibly earlier—meaning that the city will have to postpone paying off its bills and loans. Said Investment Banker Felix Rohatyn, chairman of the Municipal Assistance Corp.: "The dikes are crumbling and we're running out of fingers." Added New York Governor Hugh Carey: "We have done all that we can to help New York City.

Our resources as a state are stretched to the limit."

The basic question was whether the Federal Government would act to prevent default—and if so, how and when. The question involved many factors: the way the rest of the country feels about New York; its reputation as the very symbol of lavish welfare spending; excessive expectations and inept management. Much of the country believes that New York is simply asking hard-working Americans hundreds of miles away to go bail for the city's profligacy. Many New Yorkers in turn believe that much of their trouble has been imposed on them by the country, through welfare legislation and Great Society programs that the city could not control. In addition to suffering the ailments of all big, old U.S. cities, New York has many special problems: it is a magnet for poor immigrants and rural people; it has an unusually large number of unemployed or otherwise dependent citizens and tax-exempt institutions; it also has huge numbers of commuters—many from neighboring states—who do not carry a full tax load.

Obviously, New York is a victim of both outside events and a massive misrule that started long before Mayor Abraham Beame came to of fice. It is so far gone that reform may no longer be possible without serious social unrest. Yet the immediate problem is what its default might do to the rest of the country. Shock waves from the city's financial collapse could hurt the national and perhaps even the world economies.

The state of New York, having reluctantly moved to lend money to the city, was itself in serious trouble. New York City and state bonds account for about 19% of the $200 billion state and municipal notes and bonds in circulation. As a result, a double default could well undermine investors' confidence in the market, causing them to shun the bonds of many other cities, states, counties and local authorities, imperiling their ability to borrow money. That could lead to their defaults too, and more business failures and higher unemployment. The nation's economic recovery could be set back, and overseas financial markets might be disrupted.

West German Chancellor Helmut Schmidt told President Ford that the New York

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