Hugh Carey, Governor Who Helped NYC Duck Bankruptcy, Dies at 92

Governor Hugh Carey in 1979
New York Governor Hugh Carey speaks during a news conference at Idlewild Airport in 1979. Source: Keystone/Getty Images

Hugh Carey, the two-term New York governor who helped New York City avert bankruptcy in 1975 by imposing financial controls and made tough choices on the state level to cut taxes and balance the budget, has died. He was 92.

He died early yesterday at his summer home on New York’s Shelter Island, according to a statement from his family released by New York Governor Andrew Cuomo’s office.

“Governor Carey led our state during a time of great financial turmoil and pulled us back from the brink of bankruptcy and economic ruin,” Cuomo said in a statement.

A Democrat who served in Congress as a representative from the New York borough of Brooklyn, Carey made financial discipline a priority from his first days after taking over as governor in 1975. Declaring that New York state had been “living far beyond our means,” he told the legislature in his first State of the State speech that “the days of wine and roses are over.”

By then, New York City was already in a fiscal crisis. Within months, banks cut off the city’s access to credit because it had run up a $5 billion deficit by borrowing to pay operating expenses and loans.

Recruited Rohatyn

With his hand-picked partner from Wall Street, financier Felix Rohatyn, Carey oversaw the effort that rescued the city from a bond default.

He lent state money to the city and, with the legislature, created a new agency to try to sell its bonds. He recruited Rohatyn, an investment banker from Lazard Freres & Co., to chair that agency, the Municipal Assistance Corp., which was also given control over the city’s sales-tax revenue to repay lenders.

The governor and lawmakers also created the Emergency Financial Control Board, which assumed power over the city budget and labor contracts. Unions were cajoled into making concessions.

The governor came to agree with bankers that deep spending cuts would be required by the city, which had seen its payroll grow to 338,000 from 266,000 in 10 years. “This was my sign to Washington that the state was taking over,” Carey told the New York Times in a 1985 interview.

Ultimately, U.S. government help was needed to save the city -- and its last-resort lender, the state -- from default.

“He was responsible for solving and pulling the pieces together of the fiscal crisis,” said Stephen Berger, the former head of the state Emergency Financial Control Board, a panel Carey formed to oversee city spending. “He was a strong leader with a clear vision.”

‘Courageous Leadership’

Rohatyn, in a 1985 column in the Times, said Carey “decided bankruptcy was unacceptable and took responsibility for painful actions that had to be taken all along the way.”

Carey was widely described as cold and difficult to work with, lacking the calculated bonhomie found in many politicians. His remaining years in office, until 1983, were marked by conflict with the legislature, which handed him the first override of a gubernatorial veto in 104 years during a budget battle, and distracting stories about his personal life, including a marriage that flamed out in spectacular fashion.

“Sometimes, he did some politically stupid things, sometimes spaced out and retired unto himself,” said Daniel Kramer, author of a 1997 book on Carey’s administration, “The Days of Wine and Roses Are Over.”

Born in Brooklyn

Among his other accomplishments was the development of the Battery Park City planned community in lower Manhattan. In 1999, the agency that operates the complex was renamed the Hugh L. Carey Battery Park City Authority.

Hugh Leo Carey was born in Brooklyn on April 11, 1919, the third of six boys. His parents, Dennis and Margaret, ran an oil and kerosene distributor.

World War II interrupted Carey’s studies at St. John’s University in Queens. He joined the New York National Guard and fought in northern Europe with the 104th (Timberwolf) Infantry Division, rising to the rank of lieutenant colonel. He was awarded the Bronze Star and the French Croix de Guerre.

After the war, Carey joined his family’s business. He graduated from St. John’s and its law school and was admitted to the bar in 1951.

Seven House Terms

In 1960, he was elected to the first of seven terms in the U.S. House.

He sought the governorship in 1974 at the urging of his wife, Helen, who was battling cancer. She died 18 days before he announced his candidacy. Carey defeated Republican Malcolm Wilson, who had become governor when Nelson Rockefeller resigned in 1973 to start a think tank.

As Carey took office at the start of 1975, New York City’s mayor, Abraham Beame, had ordered the first layoffs of municipal employees since the Great Depression and bankers were warning of a credit cutoff. The fiscal crisis dominated Carey’s first year in office.

Though President Gerald Ford that October said he would veto a “bailout” -- prompting the famous New York Daily News headline, “Ford to City: Drop Dead” -- the city won $2.3 billion in federal loans in December. Six more years passed before the city could sell general obligation bonds on its own.

‘Litter Case’

“New York City was carried like a litter case by New York State until it became ambulatory,” Carey told an academic forum in 1985.

Declining popularity marked Carey’s second term after he defeated Republican Perry Duryea in 1978. Voter approval of his job performance fell below 25 percent in a New York Times poll.

He drew ridicule in 1981 when he offered to drink a glass of toxic PCBs -- polychlorinated biphenyls -- from a contaminated state office building in Binghamton, a remark Carey later said he regretted as “reckless.” He also took a public hit for a state seizure of land to prevent a dentist from building a summer home next to his on Shelter Island.

Carey married real estate developer Evangeline Gouletas in April 1981. She had introduced herself to the governor as a widow. It wasn’t until after their wedding that Carey discovered she had three previous husbands, very much alive. The marriage ended in divorce.

Harris Beach

After leaving office, Carey resumed practicing law at Harris Beach, a firm with offices in Albany in Manhattan. He also headed W.R. Grace and Co.’s government relations office in Washington, retiring in 1995.

In 2005, he was honored by the Justice Project, a Washington-based advocacy organization, for his staunch opposition to the death penalty, which cost him some public support when he was governor. Carey grounded this stance in his memories of a Nazi concentration camp he saw firsthand as an Army lieutenant colonel. Thereafter, he believed that governments shouldn’t be given the authority to end human life.

Asked once how he hoped to be remembered, he said, “As a man who loved the people of New York as much as he loved his own family.”

13 Children

Carey had 13 children with wife Helen and also helped raise her daughter from an earlier marriage, which had left her widowed.

Two of their sons, Peter and Hugh, died in a car accident on Shelter Island in 1969. Another son, Paul, a commissioner for the Securities Exchange Commission, died of cancer in 2001.

Carey underwent cardiac bypass surgery on March 4, 2010, after reporting shortness of breath while exercising. According to his family, he said before his heart surgery that being the father of 14 and grandfather of 25 “helped condition me for this battle.”

The family also said that, during the flight to New York City on an air ambulance from his winter home in Florida, he serenaded his flight crew by singing “New York, New York.”

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