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

Wriston, Walter B.


The Gray Areas of Lending


What political factors do you take into consideration when making a financial decision in a developing country like Chile or Peru versus a developed country like the United States or Japan?

There are different kinds of loans that you make to a country. It's important to differentiate them because some have political implications and some don't. Newspapers say Citibank, or Chase, or Morgan or whoever has fifty million dollars of loans to Italy. That's like saying Bank of America has fifty million dollars of loans in New York City. It means absolutely nothing. When you pull the figures apart, you may find that fifty million has been loaned to Fiat. That's an automaker with enough exports to earn the foreign exchange to repay the loan. It has zero to do with either Italy or its government. It's a private company.

The second kind of a loan is an infrastructure loan. You might lend to a government agency that's building a power plant. They have projections of usage and payments and pay-back schedules just like any commercial company. Again, it has nothing to do with whether the government is good, bad or indifferent.

The third kind of loan is to a U.S. subsidiary where the loan is guaranteed by the Export-Import Bank. It has zero risk, even though it shows up in the Italy total.

The fourth kind of a loan is one to a Volkswagen subsidiary in Rome. It's guaranteed by the parent company in Germany, so it has no Italian risk in it whatsoever.

And the last kind is the so-called balance-of-payments loan to the government itself. In that case, you evaluate the government's financial track record. You don't judge the government per se, only its record. The Soviet Union has the most repressive government in the world, but on its financial record, people have been encouraged to lend it money.

In the case of Chile, when our people told us that, in their opinion, a Communist would be elected--Mr. Allende--we wound down our exposure. That's the next thing about foreign loans to bear in mind. They are very short term. About 80 percent of them are less than a year.

When Mr. Allende came in, he did, indeed, almost destroy the country and its credit. But if you look at the map of freedom in the world, about 75 percent of the world has authoritarian governments. I don't like 'em. I grew up in this democracy, and I believe in it. But the U.S. Government has diplomatic relations with most of those governments. If we, as a private institution, let political judgments influence our lending, then we are "meddling in the internal affairs of other countries." If not, we are accused of aiding and abetting societies we do not believe in. It's a very tough nut.

  • 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