If You Ask Me: A Global Banker Reflects on Our Times
Wriston, Walter B.
Armageddon Is Late, as Usual
Mr. Wriston, would you please comment on the charges we've been hearing about how the banks are foreign centered, and they're illiquid, and they have a lot of loans to Third World countries that are going bankrupt, and how the whole banking system is on the verge of failure, or illiquidity, or something like that?
We have to have a fresh disaster every morning. If you want to give yourself a memory test, try to remember what it was last year. A few years ago everybody got excited about loans to the developing world. I read in prestigious newspapers that they were all going to go broke. The only problem with that is there hasn't been a single default on any of them.
At any given time, in any given year, out of a hundred and fifty-six members of the United Nations, six or seven are going to be in trouble. When none of them defaulted, Iran came along, and everybody said, "Ah, now the end of the world is here." It isn't. We've yet to write off our first dollar of foreign government loans, and we have an enormous amount outstanding.
The second criticism is, "Well, you rescheduled some of those loans to avoid default." That's absolutely true. What's more every E bond sold by the U.S. Government, if it followed its own laws, should have a line on it that says, "This bond cannot be repaid, unless we sell another one of like amount." We haven't reduced our debt in this country for twenty-five years; there's no way any of that debt can be paid except by "rescheduling." No government that I know of has ever totally paid down its external debt. The United States defaulted on its debt to Britain, but Finland repaid some. It goes up and down.
The liquidity of the banking system is tremendous. It runs out of everybody's ears, so I don't see any great crisis. If money-tightening continues over time, we will in fact get a semi-crunch, which is precisely what we need.
The banking system is so stable that when the Three Mile Island incident occurred, the commercial paper market didn't even blink. Think about it. It's just an enormously stable situation.
There will always be some company in trouble, there will always be some industry in trouble, there will always be some country in trouble. The function of the banker is not to be a fair-weather friend and run when the wind blows. It's to stand there on an intelligent basis and try to work it out. For thanks, we get headlines saying "RISKY LOAN." I say again, every loan is risky. The only question is: Is it within your risk-taking capabilities?
Armageddon never arrives. People with their intellectual capital invested in the end of the world are not getting a good return. But they're still waiting.