American Notes PHILADELPHIA

Philadelphia has long held a special place in American affections as a cradle of liberty. Now the nation's fifth largest metropolis (pop. 1.5 million) seems about to win a new reputation -- as the first major U.S. city to go to the verge of fiscal collapse since Boston hit the skids in 1980. Plagued with rising needs, a shriveled treasury, dubious credit and ineffectual leaders, Philadelphia last week was sliding toward budgetary disaster. What may have been its last hope, a big new loan guarantee from the Swiss Bank Corp. fizzled at midweek, prompting two Wall Street credit-rating agencies to lower Philadelphia's bond rating and making the 308-year-old metropolis a prime candidate for insolvency unless it can raise $400 million by the end of September.

Mayor Wilson Goode is widely blamed for mishandling the city's financial troubles. Goode's administration has resorted to desperate measures, such as reducing the municipal work force by nearly 2,000. Even so, falling tax revenues, a sagging business economy and the loss of federal revenue-sharing funds have pushed the city to the brink. Says Jay Abrams, a vice president at the Wall Street credit-rating firm Standard & Poor's: "Philadelphia has dug itself into a great big hole." Would even a big loan ward off bankruptcy at this point? Says city controller Jonathan Saidel: "It's just a quick fix, a bid to buy time."