The Man Who Saved New York (and My Mother)

If you are a widow and you loved your husband (as my mother loved my father), the photo on your nightstand is most likely of him. Not so with my mother, Elaine. Her nightstand, or rather, her "other' nightstand (the one that had been my dad's), was home to a framed, signed headshot of a famous financier and, by all accounts, fine gentleman whose obituary recently appeared in The New York Times: Felix Rohatyn.

In case you were wondering, my mother did not have an affair with Felix. In fact, I don't believe they ever met. They did, however, have a mutual friend, who was the source of the signed photograph. And she did love Felix, perhaps not passionately, but enough to pay homage with her bedside shrine, enough even to plant a kiss—on the forehead of course—on the glass behind which his bespectacled face rested.

You see, Felix was my mother's savior.

Elaine hated the certainties of death and taxes as much as anyone. She avoided the former for 91 years (passing on in 2015) and railed about the latter for much of that time. Ironically, she was a strong advocate of government spending, particularly programs that benefited people in need. Her politics were formed in the crucible of the New Deal, and FDR was one of her heroes, just as Ronald Reagan was a "reactionary" and a "bad man." (There's a whole other post in my queue on the words she used for people of whom she disapproved.) When tax time came, she paid what she owed, but she was loath to give Uncle Sam a penny more than his due, because everything he got took away from what she would eventually leave her children. In financial terms, this meant she hated selling for a profit (almost as much as she hated selling for a loss)—a dilemma that defined her singular strategy—hold. 

In the 1970s, her obsession with limiting tax liability led her to a decision that was supposed to help her sleep at night but turned out to have the opposite effect: she invested heavily in New York City municipal bonds. Why? Well, the interest she was getting on her safe CDs (spread out among numerous banks so as not to exceed the FDIC insurance) was, at the time, staggering—perhaps 11, 12, or 13 percent. Had she made the connection, Paul Volcker might have been another heroic figure worthy of a frame. But bank interest was taxable (i.e., bad), and municipal bonds were low-risk and federally tax-free (good). I don't know what those New York City munis were paying, but if you factored in the tax savings, they must have equalled or even outstripped the high-interest CDs. And they were virtually as safe, because, the idea of New York City defaulting on its debt was utterly unthinkable. 

Until it wasn't.

Suddenly, the greatest city in the world was about to go mechuleh (Yiddish for bankrupt), and my mother's brilliant gambit to enjoy safe, tax-free income was looking both foolish and potentially fatal to her fixed-income finances. Sure, the bonds were still paying interest, but their value had evaporated overnight, and they were nearly worthless. She was beside herself and agonized over her mistake. There were no good options. Selling the bonds for a colossal loss would have been disastrous; waiting for them to fall to zero even moreso. She was caught between a rock and a surprise debt crisis.

And then along came Felix—the man who saved New York and, arguably, the J.P. Morgan of his day (though considerably better looking). Felix took charge, restored confidence, formed the Municipal Assistance Corporation, and gracefully guided New York City back to fiscal health. In doing so, he rescued my mother. It was a miracle. You can read about his accomplishments in his death notice; I don't need to elaborate on them here. Thanks to his efforts, my mother's tanking munis were resurrected, and she eventually sold them, never to buy a bond again.

Lest you think my mom was all about money—she wasn't. The picture of Felix was her idea of a joke—albeit one with a serious undertone. There were many mementos of my father, who died when I was nine, in our house, and Elaine was a generous donor, of time as well as money, to many worthy causes. Just as her politics were defined by the New Deal, her emotions about money were, like most of her generation, shaped by the Great Depression. She was as frugal as she was generous, and she despised waste almost as much as taxes. She was also determined not to depend on anyone, especially her children, for support, and to preserve what she had for her children and grandchildren. She did a good job. An admirable job. And for that I am grateful. And thanks to Felix, who saved my mom from losing her shirt, I can rest a little easier and enjoy life a little more.

Photo: AZQuotes.com