NEW YORK CITY: Now Everyone Is Really Scared'

"We are running hard just to stay even, and that cannot go on indefinitely." So warned Investment Banker Felix Rohatyn last week as he and New York State officials desperately glued together yet another financial "solution" designed to keep New York City from defaulting on its myriad loans—for the time being.

The newest crisis was precipitated by the state court of appeals when it upset a key part of last month's "solution"—a complex scheme approved by the state legislature to raise $2.3 billion to support the city until December.

Among other things, the legislature had directed State Comptroller Arthur Levitt...

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