Even today you can argue that what New York City went through was a virtual bankruptcy and a "cram down" of sacrifices. The "moratorium" on the debt principal was the equivalent of the default everyone tried to avoid.

But what was avoided was something unknown. I wouldn't argue today that banks around the world would be threatened by a bankruptcy of the American auto industry. Indeed, some European leaders are warning that a federal rescue of Detroit would be seen as "protectionist," necessitating retaliatory trade steps in Europe. There is another crucial difference between a city and car companies. While going through a painful contraction, New York City got away with delivering fewer services to its customers. The auto industry would have to make cars that Americans still wanted to buy.

But who can be sure that if the Big Three automakers go down, it won't be like Lehman Brothers earlier this year, with surprising impacts around the world and at home? Would a default of the auto companies lead to collapses of countless suppliers and businesses around the country, or to Michigan and other states, or to financial institutions connected to them?

In his 1980 book on the city's fiscal crisis, "The Cost of Good Intentions," the author Charles R. Morris—who more recently warned of a global meltdown because of subprime mortgages—was fascinated by the subject of why everyone in the middle of the crisis had difficulty understanding what was happening around them. "Maybe we were dumb," Beame's deputy mayor, James Cavanagh, famously stated after the city's brush with financial ruin, "but nobody else seems to have understood what was happening either."

Then as now, an aphorism from Felix Rohatyn would seem to apply. Never place a bet that you can't afford to lose.