------------------------- Via Workers World News Service Reprinted from the Nov. 22, 2001 issue of Workers World newspaper -------------------------
LESSONS OF 1975 BANK TAKEOVER: ANOTHER CRISIS LOOMS FOR NYC By Milt Neidenberg New York The headline on an Oct. 30 New York Times article recalled turbulent years of class warfare in this city. The headline read, "Green says city faces fiscal crisis as bad as in 70s." The article was based on a 45-minute interview with Mark Green one week before the Democratic mayoral candidate was defeated in the local election--partly because he was outspent six to one, but also because he had resorted to racist innuendoes in his primary campaign against Bronx Borough President Fernando Ferrer. Green, speaking to Times reporters and editors, warned that the city could face an economic crisis comparable to 1975. That was when this financial center of the world was close to bankruptcy. He expressed fears that the city could face an alarming $4 billion to $6 billion budget deficit for the 2002 fiscal year. That, he warned, could create a rerun of the 1975 nightmare that rattled Wall Street bankers, insurance tycoons and corporate heads. He added that the city is again threatened by the specter of defaulting on its loans, as it was in 1975. New York's accumulated debt is now close to a whopping $35 billion. The financial health of this capital of world finance is a major concern nationally and internationally. The devastating attack on the World Trade Center, which wiped out a section of Wall Street, coupled with a deepening recession and war, has the Wall Street bankers and corporate heads moving. A temporary economic advisory committee has been set up, led by Robert E. Rubin. Rubin chairs the executive committee of the board of directors of Citigroup. The global banking and insurance dynasty includes Travelers Insurance and Salomon Smith Barney, and has interlocking ties to other major corporations. This mega-banking institution also has strong financial ties to both Democratic and Republican administrations, particularly in this city. Rubin is a former partner in Goldman-Sachs, an investment powerhouse that covers the globe. He was treasury secretary in the Clinton administration. He wields wide influence in Wall Street circles, the government and the Federal Reserve Board. 1975 FINANCIAL ARCHITECT SURFACES Another powerful individual has surfaced: Felix Rohatyn, banker and former U.S. ambassador to France. Rohatyn has maintained his connections to Lazard Freres, a global banking and consulting giant. Its clients have included Lockheed Martin, a company that recently won a $200 billion contract from the Pentagon. Rohatyn, a wily financier who mouths a liberal line, was the architect of the 1975 financial crisis that bailed out the banks when New York was about to default on its loans. Just one month before the Nov. 6 election, Rohatyn met with a group of municipal union leaders, City Comptroller Alan G. Hevesi and State Comptroller H. Carl McCall. This group oversees a combined $280 billion of state and city union pension funds. At the Oct. 4 meeting, Rohatyn reportedly encouraged the 30 participants to develop a plan to help finance the rebuilding of office towers, the transit system and other projects destroyed by the attack on the World Trade Center. Though the group did not make specific commitments, McCall, who plans to run against Gov. George Pataki in 2002, said the "pension funds could purchase bonds issued by the state or the city and guaranteed by the federal government, could provide mortgage financing for office development or could invest directly in a project." (New York Times, Oct. 5) The Times briefly spelled out Rohatyn's role during those turbulent years in the 1970s. "Rohatyn was appointed by Gov. Hugh Carey and the State Legislature in 1975 to head the Municipal Assistance Corporation (MAC), and to participate in the Emergency Financial Control Board (EFCB) which had been created to salvage the dire financial structure." These two powerful institutions, like trustees over a labor union or a bankrupt company, ran the city in every respect. They wielded more power than any elected city official, including the mayor. They were legislated by New York state statutes during the 1975-1980 financial crisis to remain in power for 30 years. To this day, they stand as a shadow government. PROTESTING WORKERS A COMMON SIGHT In those days, MAC and the EFCB controlled all revenues taken in by the city: the Transit Authority, Board of Education, Health and Hospitals Corp. and all other agencies. The board was given power to approve or reject all city contracts, including labor contracts. It laid off tens of thousands of city employees: social workers, teachers, sanitation workers, hospital workers, university instructors and nurses. It was a disaster for the African American and Latino communities and all the poor and unemployed, who suffered the most. When Wall Street refused to bankroll the city debt, MAC head Rohatyn enacted a wage freeze and more layoffs, increased the subway fare, and imposed tuition on the low-income city university students who previously had been exempt. The unions fought back. Sanitation workers went on a wildcat strike. Firefighters began a slowdown and, in the fall of 1975, the teachers went on strike. Mass demonstrations on Wall Street, led by the municipal unions, were a common sight. MAC and the EFCB--backed by Democratic Gov. Hugh Carey and a powerful array of bankers and insurance tycoons, led by the Rockefeller and Morgan interests--overpowered the labor movement. The unions were forced to accept a package of cutbacks that decimated their members. There were across-the-board cuts in all city services. With a gun to their heads, the unions agreed to commit $500 million of their pension funds to bail out the city. Wall Street still refused to invest in the city debt. Its hold on the city and its work force tightened. Even an appeal to President Gerald Ford for federal funds was met with an unequiv ocal no. Or, as the Daily News headline at the time put it: "Ford to City: Drop Dead." It was only when union trustees agreed to invest a huge chunk of their pension funds to purchase $2.7 billion in city debt that the bankers decided the risk to their bondholders had faded. They relinquished their hold on the city and opened up their deep pockets to buy MAC bonds. The threat of bankruptcy eased. Over many years the union pension funds were again made whole and some jobs and services were restored. But the labor movement and the oppressed communities never completely recovered from the 1975 financial crisis. Which class will bear brunt of crisis? Recently Rohatyn, who served as MAC chairperson from 1975- 1993, has activated his role in the current financial crisis. He is writing extensively on how to deal with another "1975." In an Oct. 9 New York Times piece headlined "Fiscal Disaster the City Can't Face Alone," Rohatyn described in detail his strategy then and now to solve the city's fiscal crisis. He said, "It took five years between 1975 to 1980 with the strong support of the city's labor unions and the banks" to end the threat of bankruptcy. In an article in the Nov. 11 New York Times Magazine, he called for MAC and the EFCB "to be reactivated." Rohatyn completely distorts the history of those turbulent years of class warfare. He has deleted the ruthless role of his Wall Street cronies who held the city's work force, their communities and the poor hostage to a few billionaire bankers. What is crystal clear is that the municipal unions are once again in Wall Street's sights to bear the brunt of this current financial crisis. More than 25 years have passed since those days when the municipal unions and their members took such heavy hits. Mayor-elect Michael Bloomberg is preparing to take over the reins of power from Mayor Rudolph Giuliani. Giuliani leaves office with tens of thousands of people homeless, jobless and hungry. Food pantries and soup kitchens are inundated as requests for emergency food rise dramatically. Unemployment has assault ed the labor movement and the unorganized, both in the public and private sectors. Billionaire Bloomberg, who spent $60 million of his own money to get elected, owns a major financial and global information company--Bloomberg LP--that has strong ties to Wall Street. The dominant financial institution Merrill Lynch owns 20 percent of the company. The chairperson of Bloomberg is a managing director at Credit Suisse First Boston. The company's clients include all the major financial firms, as well as newspapers such as the New York Times. Bloomberg is in a honeymoon stage with the city unions. His initial strategy is to cross party lines to reach the Black and Latino communities and their leaders. It is all for show; it's cosmetic. His true loyalty rests with Wall Street and big business, which were behind his obscene $60 million run for office. As the city's fiscal crisis worsens, deepened by recession and war, Bloomberg's velvet gloves will come off. Wall Street has not changed its nature. It is as hungry as ever to increase profits and production by way of massive layoffs and cutbacks. The municipal unions and their allies need to review these bitter lessons of 25 years ago and break away from the Bloomberg-Rohatyn-Rubin strategy that is about to snare them into another debacle for their members. The labor movement needs to pursue an independent political relationship with its natural allies in the oppressed/immigrant communities, the primarily youthful anti- war and anti-racist movement, and the anti-globalization and anti-sweatshop forces in the city and beyond. Developing this base could be a giant step in avoiding the disastrous outcome that workers and the most oppressed suffered here a quarter of a century ago. - END - (Copyright Workers World Service: Everyone is permitted to copy and distribute verbatim copies of this document, but changing it is not allowed. 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