Theodor de Bry’s 1590 engraving of Secoton, from John White’s watercolors. Public domain.
New York City could not roll its debts, and the question became who would cover the city.
If money is tight, a city that cannot borrow cuts the services you use first.
If you are in the middle, municipal jobs, transit, and taxes are the household version of a bond crisis.
If you have savings, city bonds stop being a sleepy holding when the city might not pay.
In 1975 New York City faced default on its notes.
The state built a rescue vehicle and Washington eventually lent seasonal help.
A city budget turned out to be a financial market.
Source: New York City fiscal crisis of 1975; Municipal Assistance Corporation; federal seasonal loans.