Financial Crisis

Published: 1975
Play Audio Archive Story - UPI
President Ford enjoys the company of his pet Golden Retriever, Liberty, on february 2, 1975, in the oval office. The dog, which was a gift to the Chief Executive, is now a year old. (UPI Photo/David Hume Kennerly/The White House/Files)

Unknown Speakers (singing): "New York, New York! A helluva town! The Bronx is up, but the Battery's down! The people ride in a hole in the ground! New York, New York! It's a helluva town! Hey, everybody ï?½ "

Ed Karrens: These are the voices of thousands of New Yorkers who rallied at Time Square to give each other support and to show the country they weren't down yet.

Well, the fact is, they were down, but not out. It was a money problem that hit the City in the midsection. It had none: no money to pay bills, no money to pay salaries. The City was on the brink of default, the failure to meet financial obligations. However, more than once the City was saved at the last minute. New York Mayor Abe Beam pleaded desperately to Washington and Albany for help. New York Governor Hugh Carey came up with an austerity program and created Big Mac, an agency that sells bonds for city revenue and offered over $2 billion in aid that would get the City on the track until December.

But in Washington, President Ford said no to any federal help, at least not until New York showed it would revamp its fiscal system and keep its financial affairs under tight control.

President Gerald Ford: "What I cannot understand, and what nobody should condone, is the blatant attempt in some quarters to frighten the American people and their Representatives in Congress into panicky support of patently bad policy. The people of this country will not be stampeded. They will not panic when a few desperate New York City officials and bankers try to scare New York's mortgage payments out of them. We've heard enough scare talk. Let's face one simple face. Most other cities in America have faced these very same challenges, and they are still financially healthy today. They have not been luckier than New York; they simply have been better managed."

Ed Karrens: While the President got much support around the country for his stand, in the Big Apple sentiments were strong and in opposition. Mayor Abe Beam ...

Mayor Abe Beam: "Today's speech by President Ford is nothing less than a declaration of default by the White House, a default of Presidential leadership in the face of the nation's most pressing domestic crisis. The President, in opting to do nothing to prevent the City of New York from facing the consequences of being unable to meet its debt obligations, has created a climate of crisis and confusion, which if unchanged will lead directly to a default."

Ed Karrens: But changes were made. Among other things, a new tax plan promises to bring in about $200 million. Finally Ford, convinced New York was heading in the right direction, made this announcement on Thanksgiving eve ï?½

President Gerald Ford: "As we count our Thanksgiving blessings, we recall that Americans have always believed in helping those who help themselves. New York has finally taken the tough decision it had to take to help itself. In making the required sacrifices, the people of New York have earned the encouragement of the rest of the country."

Ed Karrens: With the passage of the bill by the House and the Senate, New York City got through the year, even though at times it was a real cliffhanger. New York may be a helluva town, but the more than 35,000 New Yorkers who lost their city jobs since the financial crisis began may be having second thoughts about that ï?½

President Gerald Ford: "I must say to you that the state of the union is not good. Millions of Americans are out of work; recession and inflation are eroding the money of millions more. Prices are too high, and sales are too slow."

Ed Karrens: President Ford made this gloomy announcement during his State of the Union Address in January. It was clear that the United States' economy in 1975 began where '74 left off: on a downhill slide. The gloom continued during most of the year. Unemployment reached as high as 9.2% in May. The country had its largest peacetime deficit ever, and Ford said it would be worse in coming years.


To instill some new money into the system, Congress passed an anti-recession tax-cut bill in March. The bill gave individual taxpayers a minimum rebate of $100 in 1974 taxes. By the end of the year, Ford was requesting the same kind of rebate, in addition to another tax cut for '76 ï?½

President Gerald Ford: "Tonight, I propose permanent tax reductions totaling $28 billion, the biggest single tax cut in our history. Earlier this year, the Congress passed and I signed a temporary tax cut covering calendar year 1975. That temporary law will expire at the end of this year, and unless we act now, your taxes will go up again in January. I am proposing that we sweep away that temporary law and replace it, effective January 1, with a permanent federal income-tax cut that will be both larger and more equitable."

Ed Karrens: Auto dealers got into the anti-recession game by offering $200 to $500 rebates to new car buyers, and by the end of the year auto sales were looking better.

In the fall, observers said the United States was recovering from the worst recession since after World War II. The recovery, however, was slower than expected, and at year's end inflation and unemployment were still at high levels.