Module 3

Principles of Good Lending.

LESSON 7

1. Read and translate the text:

Routine Renewals

(International Finance)

Bill Hitchcock was a brilliant international financier whose field was international finance. As early as 1976 he decided that everything was going to fall apart and he decided not to be the part of the process. So he sold all his banks, resigned all his board memberships, and settled down in Northern California. He was forty-four, and a free man. In the autumn of 1978 Bill Hitchcock was offered the job of a Chief Financial Adviser to the kingdom of Saudi Arabia. He accepted the offer and went to Riyadh.

The first day on a new job is always difficult, even if you are starting at the top: dozens of introductions to people whose names you immediately forget; the grand tour of the premises ... By noon I had it behind me, and finally I found myself alone in my huge new office in the State Treasury on the top floor. My name and title were on the door in both English and Arabic.

I picked up the phone. The man who answered at the money desk knew who I was. I asked him to bring up the State Treasury's current position sheets, listing their foreign deposits and indicating the terms and due dates. Five minutes later they arrived.

After spending fifteen minutes scanning the IBM printouts, two things were clear: the amounts involved were absolutely staggering. Al-Kuraishi was right, it did not have to continue even one day longer. Saudi Arabia was the biggest supplier of money to the Western banking system: it could demand, not request, fair treatment. I went back to the computer print-outs and came up with the Bank of London and Manchester. They had a quarter of a billion of Saudi funds deposited with them on a ninety-day basis in pounds. British banks provided a high rate of return by international standards. The going rate at that time for three months was 16 per cent. The Saudis were getting 14 per cent. That deposit was due for renewal on November 2, that is, the following day.

I got back to the money desk, "Has the Bank of London and Manchester called yet about renewing that big deposit you have got with them?"

He checked and answered no. It was logical, since due to the difference in time zones it was just 9-30 in London. "Transfer the call to me when it comes in," I said and went back to the position sheets. An hour later London was on the line. "Who's that?" I barked.

"Bank of London and Manchester, international office."

"Give me Gates"

"I am afraid we don't have a MR Gate in our department"

"I mean George Gates, your boss"

"Sir, I am afraid Mr. Gates would not be available. Actually I'm just calling in regard to the renewal of a deposit arrangement that comes due tomorrow. Routine matter."

"No longer. I'd appreciate if you'd put Gates on the line. Tell him Bill Hitchcock would like to speak to him"

The line kept silence for at least a full minute. Then a loud voice: "Hitchcock, is that you? Where are you?" - "That's right, George. I'm in Riyadh"

"Of course. We've heard about your appointment. Congratulations. We must have lunch next time when you are in London."

"Fine, George. It seems that we have a few deposits with you. Large ones. One is coming due tomorrow. A quarter of a billion sterling and apparently your people would like to roll it over."

"Bill, you know, I don't concern myself ..."

"Sorry, George, but you are to concern yourself this time. Otherwise no renewal - on this one and any of the others when they come due. Your boys have been playing games with the Saudis, paying 14 per cent on ninety-day deposits." - "Those are the going rates, Hitchcock. You've been out of touch." - "Nonsense, Gates!"

"Bill," we have returned to the first names, " if the Saudis want to use our deposit facilities, or those of anybody else in London, they are going to have to accept our rates. They might be able to blackmail us on oil. They can't do it on money."

"So, you are offering 14 per cent again." - "That's right."

"Sorry, George, Transfer that two hundred and fifty million to our account at Chase Manhattan tomorrow."-I hung up.

The next five banks all came in within the next hour. All expected routine renewals from the Saudis on deposits coming due. In every case I refused.

Commentary:

the job of Chief Financial Adviser – посада головного фінансового консультанта королівства

State Treasury – Державне Казначейство

to look through the Treasury’s current position sheets – проглянути відомості поточних вкладів казначейства

the terms and due dates – умови і строки (платежу)

scanning the IBM printouts – проглянути комп’ютерні роздрукування

a high rate of return – велика ставка доходу

the going rate – поточна ставка

to roll it over - прокрутити

you have been out of touch – ти відійшов від справ

in regard to the renewal – стосовно поновлення (вкладів)

I have drained almost a billion – я вилучив з обігу майже мільярд

2. What have you learnt about:

1. Saudi Arabia’s position on the world’s financial market;

2. Bill Hitchcock, his field of interest;

3. routine matters of the State Treasury;

4. the ways to deposit great amounts of funds with some financial institutions;

5. financial management skills of some people.

3. Find the following English equivalents in the text, translate the sentences containing them into Ukrainian:

Відійти від справ; міністерство фінансів (казначейство); поточний курс валют; перевести телефонний виклик на ...; закінчення строку сплати; поселятися в; умови і строки платежу; депозити, що розміщені в іноземних банках; висока ставка доходу; призначення на посаду; депозитні кошти.

4. Answer the questions based on the text:

• Did Bill Hitchcock find the first day on his new job difficult? What did he have to do?

• What was the nature of the problem Bill was going to solve?

• Did the Saudis have any right to resent (ображатися) the arrangement with the Western banking system? Why?

• Do you approve of the line Bill adopted?

• Do you believe his line is going to be effective?

• Do you think Bill proved to be a remarkable expert in the field of finance?

• What would you have done in Hitchcock’s place?

• What were the going and the offered rates of interest? Why was such a difference needed? Was it the British way of making money?

5. Act out:

1. the telephone conversation between Prince El-Kuraishi and Bill Hitchcock: Bill is reporting what he has already done to get a clear-cut picture of the problem and proposing his plan;

2. the telephone conversation between Bill and the manager of the Bank of London and Manchester.

6. Read, translate and retell the texts.