Managing the Banking Biz

The story starts early in July when Citicorp, the corporation that owns First National City Bank, decides to borrow some money. It has been doing a good business, you see, making loans to the housing people. Indeed it is one of the few banks that have been helping that woebegone industry. It comes to market with proposals to sell notes that will be paid off every six months and that will carry an interest rate of one percentage point higher than the prevailing interest rate on Treasury bills.

The money market responds to this new idea with enthusiasm. Citicorp was hoping to raise $200 million with this issue of notes, but when it sees what a popular response it arouses, it decides to raise the amount to $850 million. And why not? It is offering a fine fat interest rate to a large number of investors, it is going to use the money productively in an area that has been pinched of late for lack of funds, and everyone would seem to be the winner.

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William F. Rickenbacker

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The story starts early in July when Citicorp, the corporation that owns First National City Bank, decides to borrow some money. It has been doing a good business, you see, making loans to the housing people. Indeed it is one of the few banks that have been helping that woebegone industry. It comes to market with proposals to sell notes that will be paid off every six months and that will carry an interest rate of one percentage point higher than the prevailing interest rate on Treasury bills.

The money market responds to this new idea with enthusiasm. Citicorp was hoping to raise $200 million with this issue of notes, but when it sees what a popular response it arouses, it decides to raise the amount to $850 million. And why not? It is offering a fine fat interest rate to a large number of investors, it is going to use the money productively in an area that has been pinched of late for lack of funds, and everyone would seem to be the winner.