Word: relending
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...recent $250 million loan to the Soviet Union's Foreign Trade Bank. Some Western banks are also trying to raise interest rates charged to Communist borrowers. They had been tacking a 1.25-percentage-point premium onto whatever rate they had to pay to borrow funds to relend in Eastern Europe. Now some are demanding a 1.5 premium...
...members' onetime colonies, under which commodity-producing nations get special loans if export revenues fall below a certain level. At Nairobi, Secretary of State Henry Kissinger will suggest an International Resources Bank that would borrow money from private firms and governments of developed nations and relend the cash to LDCs to increase raw-materials production...
...early 1960s, banks further began to concentrate on "liability management"-the concept of borrowing money to relend it at a higher rate. Citibank developed the negotiable certificate of deposit-a security that offers higher-than-usual interest to a corporation or individual investor willing to leave money in the bank for a fixed period, such as one year. If an investor wants his money back sooner, he can sell the CD to someone else. Formally, the money is a deposit; actually, it is a loan to the bank. Banks also began borrowing from the huge pool of Eurodollars held abroad...
There is a precedent of sorts for this arrangement. Since 1971, the Federal Power Commission has allowed interstate pipeline companies to borrow money, raise rates to consumers to pay interest and other fund-raising costs, then relend the cash to gas producers at no interest as an inducement to develop new supplies. But under that system, the pipeline company at least gets to deduct the interest expense when computing its tax bill...
...years ago, commercial paper was issued mostly by finance companies that wanted to raise money to relend to consumers. But when money became hard to borrow, big industrial corporations stepped up their marketing of paper through Wall Street brokerage houses as a way to raise otherwise unobtainable cash. Since 1965, the amount of commercial paper outstanding has more than quadrupled to $39.7 billion. At present, $1 of commercial paper is outstanding for every $2 of business loans by large commercial banks. Last year there was a $12 billion increase in commercial paper and a $15 billion rise in bank loans...