Word: debtors
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...financial move. Brazil may have hoped that the prospect of forgone interest income and sharply reduced bank profits would force U.S. lenders to give in to its demands for easier terms. But now that several major banks no longer assume they will receive Brazilian interest anytime soon, the debtor's threat to withhold payment indefinitely is less menacing. Says one banker: "We are saying to Brazil, 'We can survive.' " New negotiations begin this week in Manhattan between representatives of U.S. banks and Brazilian banking and government officials...
...businesses and individuals that the resulting bankruptcies and attendant hardships would probably be more severe than during any downturn in recent memory. Says Board Member Lester Thurow, an economist at M.I.T.: "You are going to have more personal defaults than normal, more corporate defaults than normal, more Third World debtor defaults than normal -- all of those dominoes tumbling at the same time...
Thus on January 1 the Adminstration released its proposed budget for fiscal year 1988. This story got the big play it deserved. That same day, however, Education Department officials announced that the Administration would ask for a dramatic expansion of a student loan program that links repayment to the debtor's income. Sounds like a good idea...
Camdessus thus becomes a prominent member of the bomb squad that is trying to defuse the explosive Third World debt problem. A former director of the French Treasury, he was favored by debtor nations, which expect him to be comparatively sympathetic to their plight. Ruding, known as a stern fiscal conservative, enjoyed more support among the private banks that have loaned billions to the debtors. The bankers are already uneasy about De Larosiere's last big initiative, a $12.5 billion rescue package for Mexico that called for private creditors to accept a stretched-out payment schedule for about half...
...twin deficits -- budget and trade -- have created a historically unprecedented pile of external U.S. debt. America now owes foreign creditors nearly $200 billion, making it the world's largest debtor country. If trade deficits were to continue at their current level, the debt could reach $800 billion by 1991, Feldstein estimated. More ominous, U.S. debt could suddenly hit a critical point at which foreign investors become concerned that their money is concentrated too much in one place. Any sudden loss of confidence, said De Vries, could send the dollar into a steep fall. A plunge in the dollar could ignite...