If You Ask Me: A Global Banker Reflects on Our Times

Wriston, Walter B.


A Rational View of LDC Loans


Do you think there's any upside limit, as far as financing goes, to what the commercial banks can lend to the developing countries? If so, how close is the American banking system to reaching that limit?

Saying "developing countries," or "LDCs," is sort of like saying "Americans." It hides a lot of diversity. There are different categories of developing countries. Some countries are able to handle large amounts of debt and some are not. The ability of Mexico to manage its affairs and get public underwriting on Wall Street, which they do, far exceeds that of, say, the Gold Coast. I don't think you can draw up a balance sheet and label it: developing countries.

The amount of money that has gone out from the commercial banking system to borrowers in developing countries is large by previous standards. Its uses fluctuate, but most of the money generally goes to finance exports. You must remember that all exports in the end are financed by the people who exported them. That's why the Arabs in the end will have to finance the export of oil.

The pattern of this lending will shift, but I am not one of those who think that there's a great international crisis abroad in the world because of the borrowing of developing countries. Not when it's being done soundly.

There will always be certain loans that are bad news, but given the opportunity, governments usually work them out. One problem loan we had was in Liberia a number of years ago. They built an executive mansion. The budget was $1 million. When it came in at $22 million, there were unpaid suppliers all over the world. We talked President Tubman into getting someone from the International Monetary Fund to put in a solid financial program. The debt was rescheduled and all repaid. That's the real answer--that it's within the capability of men and women to adopt a program that will, in fact, make a sound debt structure. I agree with you that some countries do not have that right now.

Along the same lines, the House Banking Committee said there would be no bailouts for any banks that suffer the consequences of bad LDC loans...

We have never asked for a bailout.

Wouldn't you like a safety net like that?

I don't really think so. The most important thing anybody owns is his credit status. And if you just pull the cork on the credits, what do you do then?

Suppose LDC loans were backed by gold?

There isn't enough gold in the world. There hasn't been any gold put into the monetary base in three years. The only thing that finances trade is reverse trade. Nothing else. Any difference in the trade balance has to be made up by capital inflow or borrowing. It's a seamless robe.

That's why I don't get too worried about it. We run a sovereign risk program in every country in the world. Every quarter we evaluate the political risks, the economic risks, and state of the economy. Then we cut back or increase our exposure as the judgment of our officers dictates. No, I don't think that government bailouts, or putting overseas lending on the gold standard are viable substitutes for good credit judgment.

  • The document was created from a compilation of interviews and question and answer segments with Walter B. Wriston which was later compiled into "If You Ask Me: A Global Banker Reflects on Our Times" in 1980. The original speech is located in MS134.001.034.00018.
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 Title Page
If You Ask Me: A Global Banker Reflects on Our Times
I: Getting Down to Fundamentals
The Big Cop-out
You Can't Go Bail for Everyone
Risk Is What It's All About
II: Some Basic Ills of the Body Politic
Lincoln Wouldn't Have Made It
Unpredictable Is a Dangerous Country
The Pitfalls of Single-issue Politics
Expect To Get Zapped
The Perils of Legal Pollution
The Injustice of Our Tax System
Those Wonderful People Who Bring You Inflation
Stop the Presses
Silly Premises Lead to Nutty Conclusions
Easier Said Than Done
III: New York, New York
New York City Is Alive And Well
The Road Back
IV: Careers
Rx for Happiness
Good Forward Planning
Dull Job?
A Simple Matter of Survival
Making It at Citibank
What Fast Track?
No Hiding Place
V: Once Around the World Quickly
South Africa
China: A Matter of Timing
The Real Significance of Iran
Iran and the Money Markets
Fashions in Country-criticizing
VI: The Global Financial Scene
The Elusive Eurodollar
De Facto Payments Mechanism
Too Big To Move
The Foreign Exchange Game
They Can't Leave the System
Baskets of Money
Swiss Francs
The Value of a Dollar
Not a Loss Since 1897
A Rational View of LDC Loans
Free Trade Benefits Consumers
The Destructive Costs of Regulation
The Big Rip-off
A Real Entitlement
Can Regulations Prevent Bum Loans?
The Insidious Side of Controls
Competition in Regulation
VIII: The Shape of Things To Come
Not As Big As You Think
What Lobby?
Armageddon Is Late, as Usual
Some Simple Facts about Interest Rates
An Expensive Luxury
How Big Is Big?
What We Did Yesterday Won't Work Tomorrow
A Matter of Semantics
Unpredictable Is a Dangerous Country
Privacy: A Serious Problem
The Unseen Revolution
Things Are Going To Be Different
Take the Handcuffs off Everybody
The Gray Areas of Lending
No Mouse under the Rug
Thank God We Don't Have National Banking
Competition Keeps You Awake
Accounting for Loan Losses
Not a Utility
People Like It
Computer Frauds
Some Final Words on Responsibility
About the Author