How Former NY Governor Hugh Carey Saved City from Default?

Former Governor of New York, Hugh Carey who successfully tackled New York's financial crisis in the 1970's died Sunday. He was 92.

Carey, a Democrat, was New York's 51st governor, serving two terms from 1975 through 1982. Before that, he served for 14 years as a congressman from Brooklyn.

Aptly described as "The Man Who Saved New York" in his biography, Carey became governor at a time when New York City faced default. Several state agencies, municipalities and school districts were close to insolvency. New York City was facing a $5bn deficit and banks had cut its credit. Worsening budget problems had brought the city on the brink of default.

Carey imposed tough financial controls, implemented tough spending cuts and layoffs, increased taxes and lowered state and city budgets to keep the city's economy from crumbling.

He created a new agency, the Municipal Assistance Corp, to sell bonds. Felix Rohatyn, an investment banker from Lazard Freres & Co., was recruited to chair that agency. Carey also directed the Emergency Financial Control Board, which seized much of the authority for the city's budgets from the mayor's office. He also managed to convince banks to refinance the city's debts, and got unions to make concessions.

Despite President Gerald Ford's initial reluctance to give the city a loan, Carey managed to persuade the federal government to give it the desperately needed loan. Had Carey not succeeded, New York City would have gone into default, resulting in possible disruptions in the nation's financial markets and banking system.

In fact, in his inauguration speech Carey told New Yorkers that the state's history of extravagant spending had to stop and that "The days of wine and roses are over."

"Governor Carey led our state during a time of great financial turmoil and pulled us back from the brink of bankruptcy and economic ruin," said Andrew Cuomo, New York's current governor.

"Governor Carey looked to statesmanship and compromise, rather than partisanship or parochialism, to get the state's fiscal house in order," he added.

New York City's Mayor, Michael Bloomberg, said that Carey's leadership through tough economic times had inspired him for his own tenure during the recent recession.

"His strong and determined leadership, and his ability to bring people together to fix the most difficult problems, saved New York City during one of the toughest times in our history, and set the stage for the City's incredible rebirth in the years and decades that followed," Bloomberg said.

Hugh Leo Carey was born in Brooklyn on April 11, 1919, the third of six boys. His parents ran an oil- and-kerosene distributing company. He served in Germany during World War II, and worked in the family business. He and his first wife, Helen, had 14 children. She died in 1974, the year he ran for governor. He is survived by 11 children, 25 grandchildren, and six great grandchildren.

Besides his fiscal achievements, Carey also brought environmental issues to the forefront, reformed the state court system and brought about the community placement of the mentally challenged and developmentally disabled people.

However, he is best remembered for leading New York out of the financial crisis.

"Upon leaving office, it was written that Governor Carey was a 'Governor for hard winters,'" Cuomo said. "It was true. He was tough, he was smart, and he was the person our state needed to see us through crisis."