Gerald Ford, Part III
Brian Trumbore
President/Editor, StocksandNews.com

Time to wrap up our series on the presidency of Gerald R. Ford, from an economic standpoint, with the tale of New York City and its dire financial crisis.

As I noted earlier, Ford was a veto machine, 66 in all and most of which involved rejecting Congress's requests for more spending. So as a fiscal conservative it shouldn't be surprising that when New York City encountered severe budget problems, Ford was less than sympathetic. The president had earlier vowed "to veto any bill that has as its purpose a federal bailout" and New York fit the bill.

For much of 1975 New York City stood at the brink of financial collapse. The cost of its social programs was overwhelming and there was zero budget discipline, though in this regard New York was hardly alone as other big urban areas faced a similar plight.

Default seemed a certainty and rural America took satisfaction in the idea the "chickens had come home to roost" when it came to big city profligacy. Gerald Ford assumed the role of Middle America's president. After all this is the man who once said "If the government is big enough to give you everything you want, it is big enough to take away everything you have."

From "The Century":

"The decision not to aid New York was one in which Ford had properly gauged the national mood: Many Americans were gleeful to see the nation's premier metropolis in trouble, for they had come to see the city in general (and New York in particular) as a symbol of excess and waste, a monument to failure. And they had declared their new loyalties with their feet, moving away in large numbers from the Northeast, which most represented this rusty, discredited urban view of the world, and toward the 'Sun Belt' states of the South and West."

While local officials scurried for a solution, Ford promised to veto a bailout of the Big Apple. It was the finality of his statement, though, that convinced the New York Daily News to plaster this famous headline across its front page:

"FORD TO CITY: DROP DEAD."

Ford simply saw his move as being the right thing to do and something that would encourage New York to straighten out its books.

But while reaction was positive in the heartland, as time went on others saw problems in permitting New York to collapse. Former New York governor and now vice president, Nelson Rockefeller, openly suggested the federal government might have to step in. Treasury Secretary William Simon echoed the sentiment.

From "The Presidents":

"Ford held to his stern justification that he was forcing New York to restore its own fiscal viability, but at the same time, his retreat had become inevitable. Within the city, frantic negotiations took place involving all parties, including banks that had funded the city's short-term securities. Under the pressure, all interested parties came together during additional weeks of negotiations. Drastic reductions were made in the city's work force. Bankers restructured bond issues. The new Municipal Assistance Corporation was established to sell securities. Union pension funds were committed to their purchase. One near disaster after another was averted in a series of cliff-hanger scenarios.

"Finally, with the city seemingly acting to repair the damage and the broader consequences of a default becoming clearer, Ford changed his stance when he met the press on 26 November. 'I have, quite frankly,' he announced, 'been surprised that they have come as far as they have.' Ford then asked Congress to approve federal loans to the city on a seasonal basis through 30 June 1978. He covered his own retreat by emphasizing that New York had 'bailed itself out.' Finally, by a narrow margin in the House, Congress approved Ford's request for a seasonal financing act to provide up to $2.3 billion for short-term loans during the next three years at 1 percent above the federal cost of money. To further fortify the city against default, in case that assistance failed to work additional legislation was enacted to facilitate municipal bankruptcy proceedings so that New York and other cities could adjust repayment of their debts. Ford's position, combined with local and federal measures, induced some painful cutbacks but did start the process of rehabilitating New York's finances."

New York was saved! And as I noted in an earlier piece, by 1976 the U.S. economy was beginning to turn around as inflation eased. Ford continued to hammer away at his message that a variety of social programs needed to be paired back, which he did by combining 59 of them into four block grants, and while he proposed catastrophic health insurance for everyone covered by Medicare, he ruled out a comprehensive national health plan.

Early in 1976 a poll found overwhelmingly Americans thought Gerald Ford was "a nice guy," but by a big margin they had also concluded "he does not seem to be very smart about the issues the country is facing." ["The Growth of the American Republic"]

Ford also filled you with the sense he couldn't be taken seriously. With his well-documented pratfalls, he was viewed as "a joke" in some quarters. "He fills the mind with the sense of how ordinary he is and how vulnerable," wrote Murray Kempton in Harper's. Ford's own pollster, Robert Teeter, "found that when asked what the president had done that was particularly impressive, 61 percent replied, 'Nothing,' which is exactly what 41 percent said when asked what he had done that they did not like. Advised Teeter, 'There is no clear perception of his presidency, of his goals, of where he is going." ["The Presidents"]

Nonetheless, after trailing Democratic nominee Jimmy Carter by as much as 56 to 33 percent following the Democratic Convention, Gerald Ford fought back, only to narrowly lose the election in the fall, 50 to 48 percent and just 297 to 240 in the Electoral College. Without a doubt, the pardon of Richard Nixon was the difference-maker.

Writing these pieces the past few weeks, though, I've wondered how Ford would have reacted to the scandals in the corporate boardroom, including the latest on the egregious practice of backdating stock options. Not real well, we can assume. And a belated Happy Birthday, Mr. President?..Ford turned 93 on July 14.

Sources:

"The Oxford Companion to United States History," edited by Paul S. Boyer
"The Presidents," edited by Henry F. Graff
"The Century," Peter Jennings and Todd Brewster
"The Growth of the American Republic," Samuel Eliot Morison, Henry Steele Commager, William E. Leuchtenburg
"America: A Narrative History," George Brown Tindall and David E. Shi

Wall Street History returns next week.

Brian Trumbore