CITY AND SUBURBAN
Racked with guilt and fear, the world's bankers turn to prayer
CHRISTOPHER FILDES
he world's bankers gathering here for their annual reunion at the meetings of the International Monetary Fund and World Bank found an unfamiliar invitation wait- ing for them. They were bidden, as usual, to sushi with Daiwa or scotch with Amer- ican Express — but this time they were called to an International Prayer Meeting Breakfast. That call struck a responsive chord amid bankers racked wtih guilt and fear. Prayer must be apposite, may be overdue, and in some cases will be all that remains to be tried. I recommend more of it — for bankers cooped up here, bom- barded with unremitting bad news from outside, fuelling each others' anxieties in thousands of corridor conversations, are an explosive mixture. That, as Walter Bage- hot taught us a century ago, is how credit starts to contract — when people in market-places whisper to each other: 'Is A.B. as strong as it used to be? Is X.Y. still all right?' I quoted Bagehot over the cocktail glasses to a banker here who corrected him: 'We don't whisper nowa- days. We scream.' Another caught the mood of the meetings: 'I don't like it. I'm more and more unhappy. We're talking ourselves into a deep one.' And another: 'This is one of those times when bankers get promoted for not lending money. Banking supervisors, too. No banking su- pervisor ever lost his job for being too strict.' What has set them all chattering is, of course, the Gulf crisis, manifesting itself for the moment in the oil price, but what concerns them is its effect on a financial system which had already begun to look overstretched. The Gulf states' banks have, naturally, suffered dislocation and a flight of capital. The Japanese banks — for years, now, the world's fat moneybags — are suddenly looking for money. As for the host country's banks, they, at these meet- ings, are trying to keep their heads down while looking confident. A year ago, the Morgan bank shook the meeting by provid- ing against every cent of its third world debt, and in effect challenging its New York competitiors to do the same if they could. They haven't. This year the Chase Manhattan shook the meeting by halving its dividend. American bank shares are in free fall, not helped by the Federal Re- serve's attempt to reassure the markets. We can't think, said the Fed, why everyone should get so worked up about Chase, when there are other banks with more to worry about. You bet there are. The oil price will put a brake on the world's economy, and throw the US economy temporarily into reverse. The contraction of credit is another and potentially more powerful brake. No wonder the bankers are at prayer.
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