Burns: Let N.Y. Default: Let N.Y.C. Default, Burns Advises Hill
Congress would be better advised to let New York City fall into bankruptcy, and then provide some aid measures, than to pass a federal bailout law now, Federal Reserve Board Chairman Arthur F, Burns told a House banking subcommittee yesterday.</br></br>In answer to questions by Economic Stabilization Subcommittee Chairman Thomas L. Ashley (D-Ohio), Bul ns said that although there is a ÛÏstigmaÛ attached to bankruptcy, Û÷Û÷and that troubles me,Û a receivership would make il possible to reorganize New York CityÛªs finances and still preserve its essential services.</br></br>There would be no ÛÏchaosÛ in such an eventuality, Burns said. ÛÏIÛªm inclined to think the paychecks (tor city employees ) would go forward.Û Burns said that Congress should immediately amend the bankruptcy laws so that the courts could arrange a reorganization of New York's debts ÛÏin an orderly and expeditious manner.Û Bankruptcy is a legal proceeding under which the party in default allows a court to parcel out available resources among creditors.</br></br>Once the city has actually defaulted. Burns told the subcommittee, ÛÏsome assistance to New York might be desirable.Û He said that could take the form of prepayment of some federal grants-in-aid.</br></br>He did not spell out the full implications of bankruptcy, except to say that interest payments on New York City securities would be ÛÏsuspended for a time.Û