Only after the Fed’s chairman, Arthur F. Burns, returned from a meeting with European leaders and warned Mr. Ford of the threat to global financial markets did the White House agree to the loan guarantees.
Mr. Rohatyn was hailed for standing up to Mayor Beame and for his ability to reach agreement with bankers and union leaders alike. But the turmoil — a strike by sanitation workers, a wave of police layoffs, increases in transit fares, the imposition of tuition fees for the first time at the City University of New York and, above all, the loss of city autonomy, however temporary — redounded for decades.
The crisis did not abate until 1978, when Mr. Rohatyn devised a four-year financing package, which exchanged short-term high-interest loans for equivalent amounts of lower-interest M.A.C. bonds. Under a new mayor, Edward I. Koch, the city balanced its budget in 1980. It re-entered the municipal bond market in 1981, and by 1985 the M.A.C. had stopped selling new bonds; the final M.A.C. bonds were not paid off until 2008.
Investors who bought the bonds made healthy returns, and, starting in 1983, the M.A.C. threw off healthy surpluses, which Mr. Rohatyn used tactically to guide policy from behind the scenes. Calmly pointing out to mayors and union leaders that he thought they were spending money unwisely, he made their receipt of the surplus funds conditional on their cutting expenses. He also used the surpluses to set aside billions for schools, transit, low- and middle-income housing, and the hiring of police officers in response to the crack cocaine epidemic.
It was an unprecedented exercise of private power at City Hall, and it prompted Mr. Koch, both a friend and a foe, to ask, “Who elected Felix mayor?”
Mr. Rohatyn was so stung by attacks from organized labor that in 1990, during another, less severe downturn in the city’s fortunes, he announced his resignation. Wall Street shuddered, and Gov. Mario M. Cuomo persuaded him to stay on for three more years.
A Family in Flight
Like the city he helped save, Mr. Rohatyn’s early life was a mixture of luxury and hardship. Born in Vienna on May 29, 1928, Felix George Rohatyn was the only son of Alexander Rohatyn, a Polish Jew, and the former Edith Knoll, the daughter of a prosperous Viennese banker. Alexander managed his father-in-law’s breweries in Austria, Romania and Yugoslavia until 1934, when the rising Nazi menace prompted the family to uproot itself to France.
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