Word: eurodollars
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...created, including the Saudi International Bank. Union des Banques Arabes et Franchises and the European Arab Bank. At the same time, Morgan Guaranty, Citibank and Chase Manhattan launched joint ventures with Middle East moneymen and began teaching scores of young Arabs complex arts like organizing loan syndicates on the Eurodollar market...
...international financial system that is the lifeblood of the world economy. Nearly all the currency printed or minted by the U.S. remains physically inside the U.S., but an estimated $750 billion in legal claims on that money are held by foreign governments, corporations and individuals as so-called Eurodollar accounts overseas. Many of those accounts, including the bulk of the frozen Iranian assets, are located in the foreign branches and subsidiaries of U.S. banks. The funds are not under the jurisdiction of Washington at all, but of the banks' host countries. The key country is Britain, the major center...
...crack down on such borrowing, the Fed this month began requiring that banks in the U.S., including U.S. branches of foreign banks, keep 8% of their new borrowings from the Eurodollar market in reserve; thus they can lend out only 92½ of each new Eurodollar. But U.S. corporations have already found a way to avoid the regulations. They can borrow Eurodollars from a foreign bank at about 1% lower rates...
When Britain in the 1950s and the U.S. in the 1960s tried to bolster their sagging balance of payments by forbidding companies to export pounds or dollars to build plants abroad, businesses evaded the controls by borrowing in the Eurodollar market. The amount of Eurodollars available for borrowing sharply increased after the 1973-74 jump in oil prices. Members of the Organization of Petroleum Exporting Countries, unable to spend their petroprofits fast enough, began parking many surplus dollars in banks outside the U.S. Cartel members now have $74 billion in these Eurodollar deposits. Bankers also started lending large amounts...
...bankers warn that attempts to regulate will fail. If Eurocurrency lending is regulated in London or Luxembourg, they say, it will only sail away to Singapore or Bahrain, where no controls are likely to be imposed. If the Federal Reserve restricts U.S. bank branches, borrowers will simply shift their Eurodollar business to foreign branches. Bankers also insist that these markets will be needed to lend the developing countries the $50 billion they will need over the next year to pay their oil and industrialization bills...