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Loan Pushing and Triadic Relations
Author(s) -
Deshpande Ashwini
Publication year - 1999
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.1999.tb00208.x
Subject(s) - loan , boom , cross collateralization , corporation , non conforming loan , economics , profit (economics) , doctrine , participation loan , business , non performing loan , financial system , finance , political science , law , engineering , microeconomics , environmental engineering
This paper is an attempt to define and explore the phenomenon of loan pushing in international lending in the 1970s. The earliest descriptions of loan pushing are anecdotal; this paper surveys the various facets that emerge from these anecdotes and suggests a possible definition that serves as the basis for a theoretical model. This model, inspired by the confessions of a banker, explores a triadic relationship between a corporation in the lender country, the lender bank, and a borrower in a developing country and suggests that a rational, profit maximizing commercial bank could end up pushing loans on to the borrower. Changes in international commercial banking in the 1970s that facilitated this type of loan pushing are discussed next. To the extent that the loan pushing doctrine is valid, it implies that the commercial banks were at least as responsible for the massive lending boom of the 1970s as the borrowers and should have been made to bear the cost of adjustment as well.