Abstract

""An Additional Public Assistant:" The Oil Shocks, Commercial Banking, and the Empowerment of the International Monetary Fund in the 1970s"

Nick Cohen, University of California, Santa Barbara (ncohen@ucsb.edu)

How were the practice and image of commercial banking reinvented alongside the expansion and empowerment of the International Monetary Fund in the decade preceding the global debt crisis of the 1980s? Historians of business in the 1970s have rightly emphasized the instrumental role played by the various crises of the decade in facilitating the resurgence of global finance. Examining the history of US commercial banking alongside the rise of the IMF, this paper argues that global financialization was equally contingent upon a sort of Polanyian double-movement, in which the explosion in the size and power of private international capital markets relied on the concurrent empowerment of the international institution meant to backstop such lending. In the wake of the first oil shock, commercial banks doubled down on the lucrative new business of lending to developing nations in the global south and eastern bloc eager for funds to cope with ballooning balance-of-payments deficits. In response to this same balance-of-payments problem, the IMF began to increase in size and capability through the introduction and gradual expansion of the so-called “Witteveen Facility.” By examining political debates in the United States concerning both the growing threat of unprecedented levels of sovereign debt as well as US participation in the Witteveen Facility and the positions adopted by commercial bankers in those debates, this paper demonstrates that for US policymakers questions over US participation in the Witteveen facility, the regulation of international finance, and the possible threat posed by commercial banks’ sovereign debt portfolios were often one in the same. By the end of the 1970s, moreover, commercial bankers had become some of the most vocal advocates for expanding IMF resources. By examining archival material from the Carter administration and the IMF, the papers of notorious Citibank chief Walter Wriston, congressional records, this paper straddles the line between political economy and business history.