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" Brian Lara on WNYC of the Aspen ideas festival today and Felix -- us now. Perhaps no one did more to rescue New York from its last fiscal crisis in the 1970s. As Felix throw attempt. An investment banker who is -- at the time to help the city stave off bankruptcy. He was also ambassador to France under President Clinton. Was once considered a likely candidate for secretary of the treasury or leader of the Federal Reserve. Maybe you saw his Op Ed piece in Monday's New York Times called saving American capitalism. Using holocaust survivor. Any as the new book called bold endeavor -- government built America. And why it must rebuild. Now mr. -- nice to talk to you again thank you nice to be here and it's fabulous of these so here we are in this fabulous setting people can hear the birds I think. 2000 miles from home. But it is the beginning of July the city's fiscal years beginning and it will come up maybe a billion dollar short. Because the state senate is deadlocked intent and that mayor Bloomberg's tax changes have you ever in all your experience seeing Albany. This messed up."

" Well maybe not this messed up for us and it's fairly fairly messed up."

" And and it's it's a shame because it it's really waste a lot of time minute it creates a lot of uncertainty about the economy of the city. And the states and -- that's already so uncertain enough as it is without adding to a having these kinds of fights among -- among them on the legislative and everybody knows they're going to have to come together."

" What do you think the solution this we have mayor Giuliani. Calling for a constitutional convention to fundamentally. Re infant state government. Rick Lazio. Another Republican who who wants to be governor. Saying we should go from a bicameral legislature to unicameral legislature. One house. Do you think those are Republican power grabs serious ideas do you have ideas of your own."

" No I don't think there's serious ideas because we have other priorities at this point which is to get a budget and to get going on on the on the future of the state as well as the city."

" So they can create a constitutional commission anytime they want and they can spend as much time as they want with a constitutional commission."

" But let's get today's business done."

" Today and those -- they say those are long term solutions. Giuliani said on the show this week that he would like to see them just flip a coin if necessary to. Decide who has leadership for the next two days just so they can get this July 1 budget thing figured out and renew mayoral control of the schools."

" No I don't think it's really it's it's very sad I mean here we are alone in the great states in the union. And we can't get a budget and -- it isn't all that complicated it's just it's just a quick start wanting to get it done."

" I've had guests who say the current fiscal challenges for New York City in New York State. As a result of the banking and housing crises. But actually worse than what you have to deal with in the 1970s."

" I think it's quite possible yes I think it's quite possible you know one thing I was trying to figure out why did this the recent crisis cost us."

" Because when one talks over what is the -- the war in Iraq cost what is Delorean in Afghanistan --"

" We've had this cataclysm. Enough financial markets than an hour and now an -- real estate markets. That's at some point somebody ought to figure out what kind of values have we lost. By this event and these would be both financially could be the realistic market it could be people leading the city."

" Let it it did not mean we have. Bill Gross national product of thirteen trillion or something like that. We've probably lost five or six or seven trillion dollars as part of this exercise but it's a huge amount."

" That's the federal number what that New York people have said to me that in the seventies. We had government borrowing and spending beyond its means and that was hard but correct -- Now we have the very foundation of our local economy finance and real estate especially finance. Going through fundamental re setting not a cyclical recession but. A permanent downsizing of what we can expect from Wall Street both in the private sector wealth that it generates. And in the taxes that it pays to fund government services how much do you agree with them."

" I think that that is a lot of truth to that and we we faced a different kind of situation because -- the numbers will more manageable. And secondly the phone numbers ultimately would numbers that that we could get to. And so when we when we were able to political mission together. To to try to solve our problems. We were able to get the unions the banks to some extent the federal government. And put together. -- package that ultimately we were able to force president Ford. To have to help finance -- and it cost him the election but but it saved our -- So that -- but I think that. Somewhere there ought to be in accounting. On what happened and how much it costs how much are we going to have to. Tax our citizens or or room not. Spend money that we haven't -- and and and I think personally that we are going to have an urban crisis very soon that. There are a lot of cities today that are in difficulties. Budgetary difficulties they can cut their deficits anymore. And you may have 3040 states here that that they're coming to the federal government. And saying we can't do it. Moment I don't urban crisis look like in New York coolers in Newark is that it defaulting on municipal bonds hasn't riots in the streets was. It could be all of the well. But it would start by the -- personal cutting it's budget as much as they can which in services will be very difficult words. Police sanitation -- And ultimately there will come a point. Where the the mayor and the governor will go to Washington just as we did thirty years ago. Probably together with a lot of other mayors and governors. And saying Mr. President. And we've got to have let's put it. Packaged together let's put it. Project together. That enables us to -- stretch out these loans by. Five years ten years fifteen years whatever whatever seems reasonable and house Obama doing going to you in this crisis in your opinion I don't think anybody's writing headlines Obama to New York dropped yet. Now known. That would be very troublesome. Look I think is very early for the president to to to start to to make him. Make urban decisions and talk about really fundamental changes in the structure of -- state and local government. But I think in looking at his stimulus and and this on the other things he's done. He's conscious of the fact that that this is going to need. Either another stimulus or or the equivalent. But that we are not going to make it by ourselves I think that's. And listen I'm really -- lost all false sense it is not possible."

" Felix wrote in my -- WNYC -- endeavors teller government built America in line must rebuild now. But before we wallowing too much doom and gloom I don't know if you've done to attend some of the economy sessions yet. Now here in Aspen and I've actually heard a lot of optimism. About the worst being over. The risk of another Great Depression being gone a slow but predictable recovery about to take place. Eric Schmidt CEO of Google said it showed it Obama's economic advisor Austin schools be. David West so economics editor of The Wall Street Journal they all said and I just summarized."

" Well I hope they're right."

" nothing would give me more pleasure."

" You know maybe how personal it is true that I'm basically I'm the pessimists in terms of -- outlook column. On things. Coming back to this question of oh what did it cost us to go through through the the financial Chrysler and -- crisis and when you put that together with the war in the Middle East. And it's because those are the real the real things that we're not looking. You know it's not unlikely that. That and we will that the we won't have a quick recovery that we will have a slow recovery that we won't have him. Bankruptcy will have this of that but the fact is and in my judgment. That we're going to have very very nice very very difficult times of the finances of the city in the state are going to be very difficult. The finances of the federal government or are going to be catastrophe. And something has to Gibbons. I'd rather think about an early. And then do what we did when the city was going -- when we had a week to raise ten billion dollars and and and by another thirty days house Mayor Bloomberg doing in your opinion of managing all I think he's very gun I think he's -- to some third term."

" Four for Mike Bloomberg apple song I hope so because especially NA NA NA."

" In a very difficult situation. Mean he's a man who doesn't need to glory anymore and he's and a man who understands numbers who understands our city's work -- sense of finance -- and I think he's."

" so the federal government fiscal catastrophe that you're concerned about. The way they're trying to get around it for the most part right now is by doing a lot more borrowing or printing money -- stimulus bill -- a poll of that. Are you worried about inflation coming out the other and."

" Well if I say yes you'll say here you go again if the and if you feel good I'm worried about -- not a realist but I don't know which -- because you can't be creating so much currency. Without at some point they're beginning to think about nobody what is the likelihood of inflation mean I don't think -- anybody can be sure of anything these days. But normally if you print as much money as we've been printing and it -- much money that we are going to be printing in the future. Especially -- met with the United States in relatively weak position in the world today. That yes inflation I think is is is is there's a likelihood if you."

" In your period piece on Monday called saving American capitalism. You were critical of -- capitalism you excuse me that. That caused big bubbles and scandals of the last twenty years the tech stock bubble in the ninety's the Enron and WorldCcom scandals now the kind of housing and banking melt -- do you think they're all related in some way."

" Well they certainly indicate that we are not very much in control of our own destiny. Because what happens is these things happen. They happen because of excesses both in the financial markets in the real estate markets. And and they happen because these excesses happen with inadequate regulation. And inadequate legislation and so of course it's is that something that. That we have we have to we have to face these things you say a breakdown of transparency. US OB regulation and a breakdown of fairness. This capitalism supposed to be fair and I don't think it's supposed to be fair but it better be fair. Because with -- everything that's happening in the world if if if we have a great GAAP book which is getting greater. Between people of wealth and people of of the -- of one of its small means. You're asking for for problems and if if the if the economy doesn't. React much more forcefully. And standards of living goes down and the ability to to to go to college or whatever. They assure you you -- problem so are you recommending any new rules so they're the ones that President Obama is proposing for the banking industry or anything else I think I have no way I'd I can't recommend new rules I think these one of them really. Key issues is transparency. And one thing that people who are trying to do bad things. Fear its disclosure. So and I think we have been very very lax on this question of of well disclosure and of that has been of the cause of a lot of the problems we're facing today."

" Do you think. New York benefited. Disproportionately. From these bubbles because there and finance and real estate or get sucked into the more than other places. Because of what our economy is based on."

" When our economy is or is it is a paper economy -- well and and its if finance economy. It's finance capitalism and and when you when you live by the sword -- done by the -- rules to be more family transplant to prevent more destructive ovals. Also. Lined -- depressing New York's economy disproportionately. I think -- New York's economy is going to be under pressure because we are very big place where big part of the economy and the whole economy is it is going to be in pressure or isn't pressure. And therefore New York will get its its share but. I think we've been fortunate enough and having -- and a government. That that understood these things and and saw them coming to some extent and and and they will do the best thing that can be done to to protect this city from from what -- facing that we need to reinvent the idea of new York and economic sense. The idea of New York of the problems we have and or or or host of the city as as a symbol as a city."

" As a symbol of something as opposed to something else and it's always been a symbol of you know both. Tolerance and kind of economic risk."

" Yes I think that and I think it's a wonderful thing you know I think if we could take -- the risk down a little bit and create the protection hire a little bit more. It would be better but you know that's what. That's what the heart of the city beats -- if I'm starting an investment company or running an existing line. Why should I put down in New York today -- London a Singapore or Charlotte, North Carolina will look when you -- whatever you do when you make an investment. It carries risks that carries rewards so. If you say you know -- always going to be able invest in New York City bonds that have no risk and the yield 15%. The answer is no. But if you are asking you know can -- securities of the city you know of the state. They're reasonably priced in connection with the risks that come with -- certainly I mean. Why would it locate my offices. Johnson known that it can go to the theater you can -- you can come here you can do all kinds of them in New York is it is it is an -- Is is is an extraordinary place."

" Richard Parsons the chairman of Citigroup was on the show recently and I asked him if any company should be allowed. To be too big to fail in the future. And he said yes. Because it's important if America's gonna continue to be an economic leader in the world to have big interconnected. Companies. Do you agree with the."

" Well I think there is such a thing as too big to fail."

" What that level loses his left two other people into the regular visits. But there's no question that there is a -- bit too big to fail which is why we -- we should have an adequate."

" network of of of protection. For these very big companies as they need to be too big to fail."

" I'm I'm -- thought about to lead to too big to manage them to fail because the real issue here is management. And some of these companies clearly got to the point with a people who were supposed to run them hadn't a clue. And that's that's the issue I would rather talk about too too too big to manage them too big to fail."

" Let -- end with kind of a personal question this -- my you came from. -- dominated Europe as a child. Born in 1928 yes that's right. How has that affected your views. On the issues we've been talking about or is it completely irrelevant."

" Well I don't know how tennis is. I can't I can't I was ten years old I was Jewish it was polish none of these things were good things to be you know. But I had I I had a dream analyst Franklin Roosevelt. And I have -- part of my family went back to Europe after the war and I stayed here and I was probably the best decisions and I've never made. Because when you can you know we you can travel all over the world and UC wonderful things it. That there isn't anything that has as much life and vibrancy. And potential. Than the New York City. But sometimes it's kind of lives on the edge."

" Felix roads and can help save New York's economy in the 1970s. And has thoughts on how to do so now his new book is -- is how our government built America and -- it must be -- now thank you so much thank you. Thanks for listening to WNYC on demand please check out our other program to wnyc.org. Or on iTunes. This free service has made possible by our listeners become a member -- WNYC. Today."