August 31, 1975

Pres Ford's principal econ advisers, after mos of apparent unconcern over NYC's deteriorating fiscal condition, are now suggesting that default by NYC could have serious natl implications; describe implications as pol as well as econ and are hinting that Ford has begun to assume deeper interest in problem; Treas Sec William E Simon and L William Seidman, President's Special Asst for Econ Affairs, assert in ints that default by city could adversely affect municipalities across country and nation's financial mkts; maintain default might also complicate already flagging natl econ recovery; Simon notes that he and Fed Reserve Chmn Arthur F Burns had talked 'at length' about city's financial posture and about possible impact of default; strongly denies that Ford Adm is apathetic to city's financial plight; pors of Simon, Seidman and NYS Budget Dir Peter C Goldmark Jr (L)

Sources say Natl Security Agency (NSA) eavesdrops on virtually all cable, Telex and other nontelephone communications leaving and entering US and uses computers to sort and obtain intelligence from contents; say there is growing controversy within intelligence community over whether agency's activity is legal; say in early '70s, NSA's ability to monitor foreign cable traffic provided much of its assistance to a secret surveillance by CIA of Amer pol dissidents; source says NSA monitored contacts between Amer antiwar groups and personalities and foreign govts and pol groups and provided material on ex-Atty Gen Ramsey Clark, among others; Rockefeller CIA comm rept quoted; source says most valuable 'product' from computer monitoring program is econ intelligence that enables US to make internatl econ decisions; Fed Code covering telegraphs, telephones and radiotelegraphs noted (L)

Civilians, 1st to join Peruvian cabinet since armed forces seized power in 68, reptdly will receive portfolios of finance, labor and industry in cabinet of Peru's new Pres Gen Francisco Morales Bermudez, replacing mil (S)

long lines of budget-conscious New Yorkers anxious to buy as many 35c tokens as possible before 50c transit fare goes into effect on Sept 1 have forced NYCTA to limit purchase to 1 token a person; Progressive Labor party demonstration and march against increased fare, which began at 96th St and Broadway, leads to violent confrontation with police when 200 demonstrators try to jump turnstiles at 103d St IRT station; police rept that 14 policemen and 2 demonstrators were injured; say 6 demonstrators were arrested; crowd rallies outside 24th Precinct station to protest alleged police brutality; Edison, NJ, commuter Len Bratley comments; illus (M)

Pres Ford seeks to identify his own views on strong defense budget with those of AFL-CIO pres George Meany, Aug 30 speech to labor union, Augusta, Me; notes labor has stood at forefront of defense of liberty, in war or in peace, but that defense must rest upon more than arms and armies (S)