Auteur: Karin Lissakers
The international lending spree of the past two decades has had grim consequences: billions of dollars worth of bad loans which have seriously weakened some of the world's leading financial institutions—and a drying up of credit for the very countries that need it most. Conventional wisdom holds that Eastern European and less developed countries will now have to depend on governments and international bodies like the World Bank and the IMF for financing. This important book, the first comprehensive account of the interna-tional debt crisis, argues that private banks can and must continue to play a role—but only after basic weaknesses in both the borrowing institutions and the lending banks are addressed.
Based on-fresh, original research as well as on revealing interviews with key partici-pants—cabinet members, bank CEOs, Federal Reserve governors, bank examin-ers, and others—Lissakers' eye-opening book helps us to understand why both the banks' own internal controls and the gov-ernment bank regulators promoted rather than restrained the lending. She shows how hidden tax subsidies by the U.S. gov-ernment, as well as by other industrialized countries, made loans to developing coun-tries unrealistically profitable and, in the long run, fragile. The author shows that internal political pressures rather than external balance of payment pressures drove the level of sovereign borrowing. And she explains how the conflicting pri-orities of banks, borrowers, and the inter-national political establishment unneces-sarily prolonged and deepened the debt crisis.
Lissakers concludes that if the lessons of the last two decades are taken to heart, a healthy and vital relationship between banks and developing-country borrowers can emerge from the rubble of the interna-tional debt crisis. Her book provides an invaluable guide to the recovery of inter-national lending.