In Honor of NY Gov. Hugh Carey

Monday, 08 Aug 2011 05:20 PM

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Hugh Carey, former governor of the state of New York, died on Sunday, August 7, 2011. I believe he was the greatest governor of the modern era going back to the administration of Alfred E. Smith. I did not know Gov. Smith, but I have read of his accomplishments and believe that Hugh Carey, another Irishman, was made in the same mold.

I served with Hugh Carey in the United States Congress and before that, in World War II, we both served in Europe in the 104th Infantry Division. He was a Colonel and I was a Sergeant.

We didn’t know one another during that period of service. We came to know one another when we both served in the United States Congress. He was the chairman of the Democratic and Republican Caucus of New York Members of Congress. I served at his request as secretary of the delegation.

He was on the Ways and Means Committee, considered then and now to be one of the most powerful of the House committees. When he announced that he was running for governor of the state of New York, the two congressmen who stood by his side and were part of his successful campaign were Congressman Charles Rangel and me.

I will leave to others to assess his congressional record in detail and will mention only one extraordinary accomplishment — revenue sharing legislation that provided states and cities with annual appropriations in the millions, coming from an annual congressional appropriation of $5 billion.

The legislation was first proposed by Gov. Nelson Rockefeller and implemented by Gov. Carey. In those days, $5 billion was perceived to be an immense amount, unlike today, when discussion concerning government budget expenditures and deficits requires references to trillions of dollars.

When he was elected governor in 1975, he was immediately faced with a collapsing state headed towards the pit of bankruptcy. He brought into government and used those in government to address not only the problems of the state, but the rising problems of the city of New York which was well on its way to bankruptcy during the administration of Mayor Abe Beame.

So, while straightening out the enormous fiscal problems of New York State, he also addressed those of the city. He used the expertise of intellectuals and hands-on experts in financing, like Felix Rohatyn and Dick Ravitch to propose and implement plans to stop the hemorrhaging in the city, imposing an “Emergency Financial Control Board” to pass on the city’s finances and budget with the power to reject appropriations and contracts adopted by the mayor and city council.

The creation of the Municipal Assistance Corporation (Big Mac) made it possible for the city to raise funds which it could not do on its own, the city’s bonds having been reduced to a junk rating. The genius of Felix Rohatyn was immediately felt, first proposing a seasonal loan plan to be financed by the U.S. with loans to the city allowing it to pay its bills and an agreement the loans would be repaid each year.

When it was found the Seasonal Loan Program was not sufficient because it did not allow for the city to make structural changes in governance or pay its debts — a short term debt, then about $6 billion — Felix proposed the Federal Guarantee Program which some referred to as a bailout, even though the city paid 7 percent interest on the $1.65 billion program which allowed the city’s municipal unions to buy city general obligation bonds with the U.S. guaranteeing the unions against loss in the event of bankruptcy.

The purchase of those bonds by the municipal unions was linked to huge commitments by the banks to buy uninsured city bonds, helping to save the city and themselves — owning billions of city bonds which had lost their credit rating and could become worthless. The total sum raised was $4.5 billion.

All of this required the passage in Albany of legislation in 1978 (I had been elected Mayor in November 1977) which enhanced the powers of the Financial Control Board in particular, allowing it to reject municipal contracts where the city’s ability to pay was in question.

The legislation permitted the city to operate with deficits for three years, requiring in the fourth year the adoption by the City of a GAAP budget (Generally Accepted Accounting Principles). The powers of Mac were enhanced to allow Mac to increase the amount of its total borrowings and issue bonds coming due in 2008. Few people thought we could do it, but the City not only did it, we adopted a GAAP balanced budget in 3 years, a year ahead of time.

It couldn’t have been done without the leadership of Gov. Carey who increased state appropriations for the City of New York. The City owes an enormous debt to the governor.

Last year, the state Legislature and then Gov. David Paterson honored Gov. Carey by changing the name of the Brooklyn Battery Tunnel to the Hugh Carey Brooklyn Battery Tunnel.

What I hope the current Gov. Andrew Cuomo (who supported the name change) will do is to hold a ceremony at the tunnel and afford an opportunity to those who worked with the governor in Albany to extol his many accomplishments, currently vastly underappreciated because they are not known and accord to him his rightful place in history: that of the greatest governor of the modern era.

We were colleagues in government at a particularly important time in the history of the state and city. For me, the best memory is our personal relationship: we were genuine friends.

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