William Rhodes - Banker to the World: Leadership Lessons from the Front Lines of Global Finance

Copyright 2011 by William R. Rhodes. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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To the bankers, government officials, international
financial institutions staffs, and the lawyers who worked
with me during the various debt crises of the 1980s and 1990s,
and in particular to my colleagues at Citibank.

LESSON 1
LEAD BOLDLY AND DECISIVELY

Facing Down the Sandinistas of Nicaragua,
The Middle East and Israel,
and Getting the Deal Done in China

LESSON 2
ANTICIPATE PROBLEMS BY VISUALIZING IMPACT

How Windows on Risk Shielded Citibank from the
Asian Crisis, a Phone Call Helped Save Uruguay,
and Rupert Murdoch Came to Like Bankers

LESSON 3
EXECUTE IN A TIMELY FASHION

Managing Citibanks 1991 Loan Crisis,
Creating Critical Mass during
the Latin American Debt Crisis,
and Implementing Argentinas Brady Bonds

LESSON 4
Take Prompt, Comprehensive Action

Tracking Down Mexicos Finance Minister,
Getting Brazil to Restructure Its Debt, and Managing
South Koreas Financial Crisis and Its Free Trade Pact

LESSON 5
DEFY INTIMIDATIONSTAND UP FOR WHATS RIGHT

Facing Down Robert Mugabe,
the Threat of Argentine Nationalization,
and Insisting on Collective Action Clauses

LESSON 6
WEIJISEIZE YOUR OPPORTUNITIES

Citibanks Expansion in Eastern Europe,
Argentinas Default, and Not Merging
with Bank of America

LESSON 7
KNOW THE CULTURE, HISTORY, CUSTOMS, AND LANGUAGE

Avoiding Nationalization in Venezuela,
The Latin American Debt Crisis,
and Expanding in China

LESSON 8
BUILD CONSENSUS AND USE INNOVATIVE WAYS TO SOLVE PROBLEMS

Supporting Prior Actions for Turkey,
Creating Consensus on Committees,
and Implementing the Brady Plan

This book contains many of the lessons that have been fundamental for me in managing the various international financial crises that I have been involved with over the past half century. The Great Recession of 20082009, and the evolving Eurozone crisis, demonstrate that financial crises will continue to occur. My experiences convince me that all crises can be managedthe more so if those who are called upon to assume responsibility seek to learn from the lessons of the past.

Unfortunately, this is rarely the case. It is true that no crisis is exactly like another; be it a private sector or a sovereign debt restructuring, each has unique characteristics. However, as I highlight in this volume, when it comes to finding solutions to both private and public sector difficulties, it is an error to ignore the fundamental lessons that can be drawn from past financial crises.

By early 2010, following the disclosure in December 2009 by the government of Greece that its budget deficit was far larger than had been reported, it was evident that the country faced severe difficulties that it could not solve on its own and that required the most urgent attention. I recall conversations at that time with a range of European officials who did not fully share my concerns. They did not want to consider the lessons learned from the Latin American debt crises in the 1980s and 1990s and the Asian debt crisis in the late 1990s, as they felt that these related solely to emerging market countries and did not apply to the Eurozone countries. They asserted that Greeces 16 sovereign partners in the Eurozone would be well able to assist the country and contain the problems. I noted that Greeces inability to devalue its currency because it was tied to the euro would emerge as a severe handicap, which financial markets would well understand. I stressed that experience suggested that contagion, the rapid spread of difficulties from one country to another, would become a severe problem. I ventured that only swift and consolidated European governmental action, combined with actions by the European Central Bank, could contain a rising crisis. I suggested that there had to be a convincing plan with a set timeline for its execution. Unfortunately, since the Greek authorities first revealed their budget problem, the Eurozone authorities have repeatedly responded with too little too late.

The lessons that should have been drawn from sovereign debt crises of the past have yet to be learned adequately by those charged with managing the full-scale Eurozone crisis that emerged. This is a crisis that has hobbled many of Europes banks, undermined European economic growth, created exceptionally high rates of unemployment and, in turn, had an increasingly negative impact on economic growth in much of the world. This is a crisis that will probably not be resolved any time soon. It is one that, nevertheless, can still be managed if some crucial lessons are absorbed and translated into action.