CONTRACTORS: The Navy as Banker

For the U.S. economy as a whole, the Federal Reserve Board has traditionally been the "lender of last resort" —but for some troubled defense contractors that role is now being filled by the Navy. Officially, the Navy, like the other armed services, is taking a tough line with suppliers, insisting that they deliver weapons at contract prices even if cost overruns hurt the companies. In particular, the Navy has come to the edge of a court battle with Long Island's Grumman Corp., which has flatly refused to build more than the first...

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