Jumbo Loans, Jumbo Risks

Of all the troubles threatening American bankers, none is more controversial or potentially explosive than their overseas loans. Foreign borrowers, mostly governments and companies, owe U.S. banks about $350 billion. The most dangerous loans are to such economically ailing Latin American nations as Mexico, Brazil and Argentina, which collectively owe U.S. banks $59 billion and have barely managed to avoid default over the past two years.

This foreign debt is owed primarily to nine major institutions: BankAmerica in San Francisco, First Chicago and Continental Illinois in Chicago, and Citicorp, Chemical, Chase Manhattan, Manufacturers...

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