Calling in loans

Alexander Nekvasil a8504902 at unet.univie.ac.at
Tue Aug 20 08:14:19 PDT 2002


Michael Pollak <mpollak at panix.com> writes:


> Joe Stiglitz, in his famous Behind the News interview, gave an extremely
> interesting analysis of capital market liberalization, in which poor
> countries actually end up lending to rich ones. But he started out by
> saying "Let's say a poor African country decides to liberalize it's
> capital markets. So one of its companies borrows say $100 million
> from an American bank. The rules of prudence now demand that that country
> put aside $100 million in reserves, because it knows that that bank can
> demand that money back at any time."
>
> Is that really true? That normal bank loans to companies are callable in
> full at any time? They don't have a regular schedule of repayment like
> mortgages?

There is no contradiction between these two things. A schedule of repayment does not take away the lender's right of terminating the contract, in which case all money comes due at once.



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