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Hugh Carey, New York Governor Who Helped City Avoid Default, Dies Aged 92

Hugh Carey, the two-term New York governor who helped New York City avert bankruptcy in 1975 by imposing financial controls and made tough choices on the state level to cut taxes and balance the budget, has died. He was 92.

He died early yesterday at his summer home on New York’s Shelter Island, according to a statement from his family released by New York Governor Andrew Cuomo ’s office.

“Governor Carey led our state during a time of great financial turmoil and pulled us back from the brink of bankruptcy and economic ruin,” Cuomo said in a statement .

A Democrat who served in Congress as a representative from the New York borough of Brooklyn, Carey made financial discipline a priority from his first days after taking over as governor in 1975. Declaring that New York state had been “living far beyond our means,” he told the legislature in his first State of the State speech that “the days of wine and roses are over.”

By then, New York City was already in a fiscal crisis. Within months, banks cut off the city’s access to credit because it had run up a $5 billion deficit by borrowing to pay operating expenses and loans.

With his hand-picked partner from Wall Street , financier Felix Rohatyn , Carey oversaw the effort that rescued the city from a bond default.

He lent state money to the city and, with the legislature, created a new agency to try to sell its bonds. He recruited Rohatyn, an investment banker from Lazard Freres & Co., to chair that agency, the Municipal Assistance Corp., which was also given control over the city’s sales-tax revenue to repay lenders.

The governor and lawmakers also created the Emergency Financial Control Board, which assumed power over the city budget and labor contracts. Unions were cajoled into making concessions.

The governor came to agree with bankers that deep spending cuts would be required by the city, which had seen its payroll grow to 338,000 from 266,000 in 10 years. “This was my sign to Washington that the state was taking over,” Carey told the New York Times in a 1985 interview.

Ultimately, U.S. government help was needed to save the city -- and its last-resort lender, the state -- from default.

“He was responsible for solving and pulling the pieces together of the fiscal crisis,” said Stephen Berger, the former head of the state Emergency Financial Control Board, a panel Carey formed to oversee city spending. “He was a strong leader with a clear vision.

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