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B of A Should Have Checked Foreign Nations' Credit First

June 21, 1987

When I heard of BankAmerica being the latest to follow Citicorp by setting aside more than $1 billion against bad loans to Third World nations, ("Hike in Bad-Loan Reserve Nets $1-Billion B of A Loss," June 9), I was angered. Why are large banks being allowed to get away with business decisions an informed 8-year-old would never make? Why are we, as taxpayers, forced to back these bungling behemoths through the Federal Deposit Insurance Corp.?

The Times stated: "The BankAmerica chief executive said that, to determine the size of its reserve, the bank conducted extensive analyses of the economic prospects of each of the 45 countries. It looked at the current level of reserves, the ability of each country to meet its interest payments, the mix of public and private borrowing and the potential value that the bank could realize by selling its loans to another bank or investor."

Pardon me, but shouldn't B of A have taken these actions before it foolishly agreed to lend billions to dubious credit risks? Let me ask you this: Why do large banks go through extensive 50-page credit applications, critical assessments of ability to pay, etc., when lending amounts less than $100,000 to American citizens applying for home loans yet throw those procedures out the window when it comes to lending billions to irresponsible, economically ignorant foreign nations? This incongruity gives a new meaning to the phrase "penny wise and pound foolish."

It seems to me that if the federal government, through FDIC, is guaranteeing the deposits of major banks, and that the only source of income the government has is the taxes it collects from its citizens, that this makes us, indirectly, shareholders in these banks. Accordingly, we, through our government, ought to have some say in preventing the suicidal policies these banks are following in lending money to people who will never pay it back.

LAURA G. BROWN

Los Angeles

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