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

Wriston, Walter B.


No Mouse under the Rug


Do you see the banking free zone coming into New York City? And what about the criticism that it would let a lot of capital flow out of the country?

The net of it is this: Since time immemorial there have been free trade zones--seventeen of them in the United States. You land your goods behind a wire fence, then you trans-ship them. It's exempt from U.S. customs duties and local taxes because no domestic business is done. It's all foreign business--just passing through. The same applies to the new banking proposal. It's all foreign banking--just passing through.

The main problem with the banking free trade zone is that there's nothing the matter with it. Everybody is looking for the mouse under the rug. But there isn't any. They can't believe that we proposed this without some kind of ulterior motive.

The purpose right up front is to bring back to New York some of the international financial market that we lost to London and various other booking centers offshore, like Nassau, Bahrain, Hong Kong, and Singapore.

As it is, we borrow money from the Eurodollar market in London, book it in Nassau and lend it to Brazil. All the banking free trade zone would do is put a rope on the island and tow it into New York harbor. Absolutely nothing else would happen.

It doesn't make any great difference to Citibank. We can operate, and operate, all around the world. We think it would be a lot better, though, if we could generate those jobs in the City of New York.

Since the Eurodollar market opened in London ten years ago, they've added more than a hundred thousand jobs in the City of London, while New York has lost about the same amount. New York can't afford that. The financial community, including the exchanges, brokers, dealers and so forth, now supplies 350,000 jobs in this city, which is roughly 10 percent of the city's work force. We watch the brokers move across the Hudson to Hoboken and other garden spots. We watch big industry move upstate and to Connecticut. I sometimes think Danbury is going to be the size of Pittsburgh in another few years. The financial community is also moving out. I don't see any good reason to go on exporting jobs from New York City.

Well, the banking free-zone idea passed the New York Legislature with one dissenting vote, which I guess is some kind of record, since the last time they gave themselves a pay increase. Governor Hugh Carey and I went down to Washington to present the idea to the Federal Reserve Board.

When we first launched the idea, there was a lot of nonsense about so-called monetary leakage. I never knew what it meant. It sounded very sinister. Henry Wallich[29]  took me out in the woods and lost me a couple of times trying to explain it. It doesn't make any difference the dollars are. Only one guy prints them, and that's the Fed.

Now, the out-of-town banks are worried that it will give New York a competitive advantage, so they're playing cat-and-mouse on the thing, and throwing sand in the gears. But there are a hundred and twenty billion dollars going through the system every day and the Bank of America's Edge Act office[30]  is part of that system. So there's no competitive disadvantage. It's true that the settlement procedures go through the Fed, but there's no law that says an out-of-state bank can't have an account with the New York Fed.

They complain that Edge Act corporations would have less borrowing power than their parents. On the other hand, all of them are getting guarantees from their parents now, so I don't think that's much of a problem.

Banking free zones would enhance the marketplace all over because you need one in every time zone. California should have one, without question. There'll probably be one in Illinois. The foreign exchange market and the Eurodollar markets never close. So you hand off your position from London to New York to San Francisco to Hawaii. Then you go on to Hong Kong, Singapore, Bahrain, and back to London.

I don't see any downside to the idea, but there's a vast suspicion that New York banks are trying to get away with something. The effect on the monetary system will be absolutely zero. If I were a regulator, I'd rather have these transactions taking place in the United States, where I could watch them, than spread all over the world, where I can't.

It will happen one of these days, but achieving the inevitable is sometimes time consuming.


[29] Formerly professor of economics at Yale University and a member of President Eisenhower's Council of Economic Advisers, he is presently on the Board of Governors of the Federal Reserve System.

[30] Offices established, since 1919, by banks outside their home states specifically to provide financial services related to international trade.

  • 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