The speculation and its collapse have brought unemployment in Wall Street and throughout the financial industry. Far more serious, however, is the burden of debt and interest charges of the corporations that suffered or successfully resisted takeover. To avoid bankruptcy, they have been meeting these charges by curtailing employment and further diminishing investment in plant improvement and new facilities. Managerial staff is also being pared down. This unemployment, which extends on to blue-collar workers, and the fear it engenders are having a depressing effect on consumer expenditure and output.
There is a further and grave effect here. In Northeast United States, as earlier in Texas, houses, apartment houses and, above all, office space have been built with abandon. Whole areas of Boston, New York and other cities have been transformed. Those so engaged have rivaled the junk-bond promoters in community and even national fame.
The collapse of the real-estate boom has left not only empty houses, apartments and office buildings but has idled construction companies and workers, and, most important of all, is having a highly adverse effect on the banks.
Large banks of New York, Boston and other Eastern cities are now struggling with a mass of unpaid loans and have reserves far below what both they and the regulatory authorities deem adequate. In consequence, they have had to curtail lending for other purposes--the banking system is contributing sharply to a more general recession.