Word: citicorps
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...arts studies at Washington & Jefferson College near Pittsburgh. Reed served in Korea as an Army Corps of Engineers officer, then briefly joined Goodyear Tire & Rubber as a trainee. In 1965 he earned a business degree from M. I. T. 's Sloan School of Management, signing on after graduation with Citicorp's predecessor, First National City Bank. Within five years, Reed found himself head of the bank's notoriously disorganized back-office operations, which were plagued by backlogs of check-processing paperwork. Reed cleared up the mess by starting work before dawn, thereby making a good start at earning his "brat...
...success won Reed the daunting task of expanding the bank's consumer business, a major goal of former Chairman Wriston, who became a mentor. Reed triumphed again: he opened hundreds of new branches, bought the Carte Blanche and Diners Club credit-card companies, and launched Citicorp even more heavily into the consumer credit-card business by signing up 2 million new members for Citibank Visa cards. Expansion initially created staggering bank losses of more than $200 million in three years. But Reed eventually turned the consumer operations into a major moneymaker -- and helped position himself as a prime contender...
Rumors of what Citicorp Chairman John Reed was about to say had already roiled stock and bond markets last week as the trim executive stepped up onto a rostrum in Manhattan. Soon the confirmation flashed around the world: the largest U.S. bank (1986 assets: $196.1 billion) had made an almost heretical break with the U.S. financial community's long-standing practices in handling its crushing burden of $62 billion in Third World debt. Reed declared that Citicorp intends to set aside, effective immediately, no less than $3 billion in additional reserves to cover loan losses on its $133 billion portfolio...
...Citicorp's tough decision is intended to buttress the bank's financial statement, which until now has been steadily profitable (see chart). But the move could have a profoundly unsettling effect on the hundreds of other international banks and dozens of debtor countries involved in the five-year- old Third World debt standoff. At one stroke, Reed had admitted that Citicorp, and probably most other large banks as well, may never collect on major portions of the onerous Third World debt burden...
That admission could bring on increasingly stormy international debt negotiations, since banks may no longer be willing to continue the seemingly interminable cycle of stretched-out loans and infusions of cash that have so far characterized the debt tango. At the same time, Citicorp's move could jar the Reagan Administration's so-called Baker Initiative to ease the international debt problem by encouraging moderate Third World growth through measured dollops of additional loans. Citicorp's decision to set aside funds puts pressure on other heavily exposed U.S. banks to do likewise. That policy, in turn, could help push...