Page last updated at 16:05 GMT, Sunday, 12 October 2008 17:05 UK

New York faces up to downturn

By Robert Plummer
Business reporter, BBC News, New York

As Wall Street's market turmoil continues despite the Bush administration's bail-out efforts, it's important to remember one thing: the world viewed from Washington and the world viewed from New York are two quite different planets.

Mayor of New York, Michael Bloomberg in New York (02/10/2008)
Mr Bloomberg says he can lead New York through the financial downturn

On Capitol Hill, the talk is of a leadership vacuum as a lame-duck presidency implodes, while the financial crisis distracts attention from the process of choosing a successor.

But in the financial hub of the US, the market chaos is giving a boost to the city's existing political leadership.

Buoyed by campaigns in New York's two tabloid newspapers, Mayor Michael Bloomberg has called on the city council to change the law so he can run for a third four-year term in November 2009.

"Given the events of recent weeks, and given the enormous challenges we face, I don't want to walk away from a city I feel I can help lead through these times," he says.

With his track record as a billionaire businessman, Mr Bloomberg is exactly the kind of figure who might be despised as a "fat cat" by Congressmen who opposed the $700bn (410bn) financial rescue bill.

But in New York, he is widely seen as the man to steer the city through the current economic troubles.

'Drop dead'

The fact is, New York officials are fully aware that while their country is unlikely to go bust, their city certainly can.

It nearly happened in October 1975, when New York City came close to defaulting on its debt obligations after months of fiscal crisis.

Gerald Ford
President Ford declined to bail out New York in 1975

President Gerald Ford refused federal assistance to spare New York from bankruptcy, as immortalised in the celebrated New York Daily News headline: "Ford to City: Drop dead".

Since then, New York has lived through much brighter times, yet its economy is anything but diversified.

The city has relied heavily on what planners call the "Fire" industries: Finance, Insurance and Real Estate.

In a downturn such as the current one, that means hard times with a vengeance. Last month, the New York State Comptroller, Thomas DiNapoli, estimated that the financial turmoil could cost up to $3.5bn in lost tax revenues over the next 18 months.

"The fallout from the Wall Street crisis is starting to hit the state hard," he said.

Worse still, he expects job losses to total as many as 40,000, mainly in New York City, as the crisis spreads from the financial institutions themselves to others who rely on them, such as legal firms and restaurants.

Rich and poor

But not everyone living in New York is a financial Master of the Universe, with a sky-high salary and bonus to match.

The city also contains the poorest Congressional district in the entire US, located in the South Bronx and represented in the House of Representatives by Jose Serrano.

Wall Street sign
New York's economy is narrowly based

Mr Serrano, a Democrat, was the only New York City Congressman to vote against the $700bn bail-out package, which he did twice - both when it was defeated in the House on 29 September and when it was approved on 3 October.

"I don't think that Wall Street doing better necessarily helps people in my district," he said.

"When Wall Street was doing great and these guys were giving each other $50m bonuses, I couldn't see anything happen to the Bronx that made me say, 'Wow, there's some good from what's happening on Wall Street'."

Mr Serrano points out that his district is within walking distance of the nation's richest district, on the Upper East Side of Manhattan, and resents giving "a blank check" to the same people who caused the financial crisis in the first place.

Easy credit

And what about the ordinary people of New York, struggling to make ends meet while financiers and politicians squabble?

West African-born Moussa, 38, is one of them. He came to the US from his native Ivory Coast 18 years ago, to work seven days a week as a taxi driver and chauffeur on Staten Island.

Eight years ago, he ran into money problems and was declared bankrupt. He blames both his own woes and those of the wider US on the availability of easy credit.

US home for sale
New York is less badly hit by foreclosures than many other states

"If you go into Macy's or Bloomingdale's with a $50 or a $100 bill, they have no change," he says. "All they want is credit cards.

"But if you get a credit card, the next day 20 more offers arrive in the mail.

"Everything is credit, credit, credit."

As it happens, New Yorkers in general are relatively unburdened by credit card debt, according to a consumer group, Americans for Fairness in Lending.

On average, they owe $1,683 each on their cards, while the typical Alaskan borrower owes roughly twice as much.

In terms of house repossessions, New York is also holding up fairly well. According to latest figures from analysts Realtytrac, it has the 33rd highest rate of foreclosures out of the 50 states, whereas neighbouring New Jersey comes in at number 11.

But with market mayhem still in full swing, many still fear for their financial well-being - and there seems little sign of a return to stability any time soon.

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