“Countries don’t go bust”

“Countries don’t go bust” (often written as “sovereign nations don’t go bust/bankrupt/out of business”) is a famous statement of Walter Wriston (1919-2005) a chief executive at Citibank from 1967 to 1984. Citibank had given large loans to Latin American nations, but Wriston defended the policy with his “countries don’t go bust” statement. Wriston said the statement—in different forms—several times in 1982 and 1983.
 
Many economists have disputed the “countries don’t go bust” theory.
 
 
Wikipedia: Walter Wriston 
Walter Bigelow Wriston (August 3, 1919 – January 19, 2005) was a banker and former chairman and CEO of Citicorp. As chief executive of Citibank / Citicorp (later Citigroup) from 1967 to 1984, Wriston was widely regarded as the single most influential commercial banker of his time. During his tenure as CEO, the bank introduced, among other innovations, automated teller machines, interstate banking, the negotiable certificate of deposit, and “pursued the credit card business in a way that no other bank was doing at the time.” With then New York Governor Hugh Carey and investment banker Felix Rohatyn, Wriston helped save New York City from bankruptcy in the mid-1970s by setting up the Financial Control Board and the Municipal Assistance Corporation, and persuading the city’s union pension funds and banks to buy the latter corporation’s bonds.
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Quotes
. Countries don’t go bust
 
Google Books
6 September 1982, Time magazine, “The Wobbly World of Banking” by Jay Branegan, Alexander L. Taylor III and Frederick Ungeheuer, pg. 85, col. 1:
Bankers confidently told one another, as Citibank Chairman Walter Wriston is fond of saying, “Countries don’t go bankrupt.”
 
31 October 1982, Sunday Oregonian (Portland, OR), “Bank boom ignores threats of defaults” by Hobart Rowen, Pg. E3, col. 2:
One view in the banking world, best articulated by Citicorp Chairman Walter Wriston, is that banks have and should have considerable leeway in their lending because sovereign nations do not go broke. But other bankers, such as Robert V. Roosa of Brown Bros. Harriman, have challenged that view.
 
Google Books
What’s Ahead for the Economy:
The challenge and the chance
By Louis Rukeyser
New York, NY: Simon and Schuster
1983
Pg. 239:
Before they knew it, these free-lending bankers — breezily acting in the belief that, as Citibank’s Walter Wriston misleadingly put it, “countries don’t go bust” — found that they were in a sea of bad debts far higher than their well-intentioned little heads.
 
18 April 1983, Miami (FL) Herald, “Latin IOU struggle is triggering jitters,” Business, pg. 3H:
Citicorp’s chairman, Walter Wriston, said during a recent visit to Miami that “countries, unlike businesses, don’t go bankrupt.”
 
Cato Institute
Cato Policy Analysis No. 24
May 26, 1983
Deficits and the Economy
by Joe Stilwell
Joe Stilwell, a graduate of the Wharton School of Business, is an associate policy analyst of the Cato Institute.
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In the 1970s, most sovereign nations were considered to be capable of repaying almost any loan. The famous phrase by Citibank’s Walter Wriston, “Sovereign nations do not go bankrupt,” rings hollow now. With the de facto defaults by Poland, Mexico, and other countries, and with the dangerously close-to- default situations in countries like Nigeria and Brazil, it is no longer believed that governments can always exact more money through either taxation or currency inflation. Nevertheless, lenders seldom consider where the money to repay the U.S. government’s debts will come from.
       
Google Books
Aid:
Rhetoric and Reality
By Teresa Hayter and Catharine Watson
London: Pluto Press
1985    
Pg. 32:
Walter Wriston of Citibank, the banks’ most prominent ideologue and publicist, proclaimed that ‘countries don’t go bust’.
   
Google Books
The Alchemy of Finance:
Reading the mind of the market
By George Soros
New York, NY: Simon and Schuster
1987
Pg. 99:
Walter Wriston of Citicorp asserted that “sovereign nations don’t go bankrupt.”
 
Tufts Digital Library
Wriston, Walter B. “Was I exacting? Sure. Was I occasionally sarcastic? Of course.” Institutional Investor 21, no. 6 (June 1987): 16(5):
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I said at the time that no American bank would fail because of it - which turns out to be true - but that many would fail on good American real estate and oil. That turns out to be true, too.
 
But that’s not very exciting. People would rather talk about my comment that LDCs (Lesser Developed Countries—ed.) don’t go bankrupt. Well, they don’t.
 
14 June 1992, Mobile (AL) Press Register, “Latin America is flavor of the month” by Lisa Genasci (AP Business Writer), pg. 2C, col. 1:
Part of the reasoning for lending then was that Latin America, with vast natural resources, looked safe. Citicorp’s then chief executive officer, Walter Wriston, often said that unlike individuals, countries don’t go bankrupt.
 
Jagjit Chadha’s Macro View Point
Tuesday, 7 October 2008
“Countries Don’t Go Out of Business…”
I was this morning reminded of the Chairman of Citicorp’s 1982 famous injunction that a country cannot go bust. What Walter Wriston said at the time of Mexico’s default on its debt to commercial banks was: “Countries don’t go out of business….The infrastructure doesn’t go away, the productivity of the people doesn’t go away, the natural resources don’t go away. And so their assets always exceed their liabilities, which is the technical reason for bankruptcy. And that’s very different from a company.”
   
The Market Oracle
Why GM is More Bailout Worthy Than Citigroup
Dec 05, 2008 - 08:49 AM
By: Money_Morning
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Why Citi Should Fail
Allowing a large bank such as Citigroup to disappear is probably beneficial. It reduces competition for other major banks, allows medium-sized banks to expand into the space opened up, and provides an appropriate penalty for decades of bad management. Citi was a leader in the Latin American loan crisis of the 1980s; its then-Chairman Walter B. Wriston famously opined that “countries don’t go bust,” a sentiment that has been repeatedly disproved.
 
Google Books
This Time Is Different:
Eight Centuries of Financial Folly
By Carmen M. Reinhart and Kenneth S. Rogoff
Princeton, NJ: Princeton University Press
2009
Pg. 51:
Former Citibank chairman (1967–1984) Walter Wriston famously said, “Countries don’t go bust.” In hindsight, Wriston’s comment sounded foolish, coming just before the great wave of sovereign defaults in the 1980s. After all, he was the head of a large bank that had deeply invested across Latin America. yet, in a sense, the Citibank chairman was right. Countries do not go broke in the same sense that a firm or company might. First, countries do not usually go out of business. Second, country default is often the result of a complex cost-benefit calculus involving political and social considerations, not just economic and financial ones. Most country defaults happen long before a nation literally runs out of resources.
 
Bloomberg.com
European Nations ‘as Bad as Argentina,’ Ferguson Says (Update1)
By Jennifer Ryan and Rishaad Salamat - June 1, 2009 08:30 EDT
June 1 (Bloomberg)—Many European governments’ finances are as risky as Argentina’s were at the height of its worst financial crisis, and the U.K. gives cause to be “extremely nervous,” Harvard University professor Niall Ferguson said.
 
“It is a myth that countries don’t go bust, you only have to look at the history of Latin America to see that they do,” Ferguson told Bloomberg Television today. “When you look at the financial position of many European countries today, especially east European countries but also some west European countries, it’s every bit as bad as Argentina was in 2002.”