Growing Rich - Arabictrader.com

KIRK KAZANJIAN
33 percent of the vote between us, and the Japanese president could
strong-arm a couple of its borrowers to make sure we always had 50
percent of the vote. As long as the two of us could control the board
together, the Japanese wouldn’t do anything to upset us, such as
making loans to Vietnam. Whenever it came up, and it did, the board
would push for a Vietnam loan. The Japanese president would then
decide he’d have to send a mission to Vietnam to see how things were
going there. That would take six months. Then he had to put out a
report three months later. By then it was too late.
“I did another thing to help the Bank,” Papp continues. “The Bank
borrowed money largely from the United States at that time in the
free market. The investment bankers would take the World Bank price
of money and make us pay a quarter of a point more. The rationale
was they were bigger and older, and we were out there in Asia. I told
the Japanese president I didn’t understand why we were paying more,
since he was running this Bank better than the World Bank. I felt we
should pay less, not more. He agreed. But he said the availability of
money was more important to him than the rate. I assured him we
could still get the money, but should press for a lower rate. The next
time the investment bankers came to Manila to tell us what the price
should be, I told the Japanese president to object to it. He did and
asked for the lower rate. The investment bankers promptly shouted,
‘We’re insulted you would ask us that.’ I told the president to tell
them he was being pushed by his board to go to competitive bidding
for future loans, to see how they would react. The bankers almost
panicked. They countered by claiming that the market sets the rate,
and whatever World Bank bonds sell for, ours sell for a quarter point
higher. I told the president to take a chance, cut the rate, and see if
our bonds would sell anyway. Of course, they did. What happened is
the secondary market immediately cut the spread from a quarter of
a point to 15 basis points (0.15 percent), because as long as every
investor knew the next offering would be 25 basis points more, the
secondary market wasn’t going to flinch. But if we changed the offering,
suddenly the secondary market would reflect that. I figure I saved
the Asian Development Bank 10 or 15 basis points on every bond issue
that came after that. They borrow in the billions, so that’s a lot of
money.”
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