Hookers, jaguars, and lots of stupid loans.

• Author: Lane, Charles
• Position: Third World's bank loans

HOOKERS, JAGUARS, AND LOTS OF STUPID LOANS

During the seventies, lending to the ThirdWorld wasn't just a job. It was an adventure. Just ask S.C. Gwynne, who worked in the international credit department of Cleveland Trust during the peak of the boom. Before he was 26, he "had been to 25 countries and was one of four bankers managing a $150 million international loan portfolio. . . . I traveled overseas three to four months a year. In Hong Kong I was met at the airport by a chocolatebrown Rolls Royce, in the Philippines by a red Jaguar, in Saudi Arabia by a stretch Mercedes. I stayed at Claridges while in London, at the Oriental in Bangkok, and at the Meridian in Jeddah. I flew, ate, and drank first class.' Lorenzo the Magnificent never had it so good.

Gwynne's funny, often astonishing, tale* of ayouth spent lending American money south of the equator adds a much-needed dash of color to what is now the dreary and all-too-familiar story of how bankers led the Third World and the industrialized world alike into the sorry mess we now know as the international debt crisis. Furthermore, his experience as a former insider at Cleveland Trust, a "regional' bank, enables him to explain the perspective of banks other than the big money-center operations that dominate finance in New York, Chicago, and California. The big boys' activities in Latin America and elsewhere are more publicized, but the smaller regional banks' role in the lending boom and the debt crisis was in many ways just as important. Collectively, the regionals constitute a major power bloc; they hold 43 percent of the total foreign debt owed to our banks. (The top 15 banks have the rest.)

* Selling Money. S.C. Gwynne. Weidenfeld & Nicholson,$16.95.

"Going global' became imperative for thesebanks in the seventies because their domestic lending opportunities were limited. Interstate retail banking (mortgages, car loans, etc.) was prohibited by the federal Glass-Steagal Act, and many states limited banks' intrastate retail lending to a single city or country. To expand, regionals increasingly turned to supplying loans to corporate clients, which wasn't restricted. These corporate clients, of course, had customers in the Third World, and the banks soon realized they could help their U.S. clients and themselves by lending to these foreign countries. Although the traumatic debt crisis of the eighties--with its "non-performing loans' and looming threat of default or even bank collapse--has...