Word: reed
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...lending," according to Joan Goodman, who follows the industry for the Pershing brokerage firm. Because most of Citicorp's foreign competitors have already set aside large reserves against potential Third World losses, those banks have enjoyed higher international credit ratings and therefore lower costs in raising money and capital. Reed's draconian new effort, says a top West German finance official, "certainly represents an effort by Citicorp to catch up with its competitors on the Continent...
...sweeping $3 billion move was completely in character for Reed, who has made bold strokes before during his meteoric rise at Citicorp. As an executive vice president, for example, he led the bank into the computer era, field marshaling the firm's early entry into the area of teller automation and then directing Citicorp's heavy involvement with Visa and MasterCard credit cards. When it came to making a convincing move last week, Reed reached for a large number. Said he: "Obviously it's a judgment call. Any number with nine zeros can only be approximate. We're clearly costing...
...concerned at that eventuality. The Administration's Baker Initiative calls for $20 billion in private loans to be issued to the Third World over the next three years in order to foster growth. The program has been slow to get rolling. Said one Manhattan economic consultant: "Some bankers believe Reed has killed the Baker Initiative...
...Reed's approach is unlikely to win universal applause in the banking industry either. For one thing, the measure will force other holders of Third World loans, most notably such profit-parched institutions as BankAmerica ($7 billion in Third World loans) and Manufacturers Hanover ($7.5 billion), to agonize over whether to match it. Not all the big banks are in the same relatively good shape as Citicorp, and thus they are less able to take such action. Says one top New York City banker: "Reed is being really selfish. The stakes are much higher than the future of a single...
Someone liable to be just as irked at Citicorp's move is Fed Chairman Volcker. Some stories have it that he called Reed personally to complain about the write-off. Why? If banks rush to follow Citicorp's lead, the industry might be so weakened by losses that the Fed would eventually feel obliged to help out by putting downward pressure on interest rates. But that would run counter to the Fed's efforts to buoy up the weak U.S. dollar. Says Timothy Scala, money-market manager for Buffalo-based Manufacturers and Traders Trust: "This demonstrates just how grave...