“It would not be right to save foreign currency borrowers,” said Sean Cole, President of the Central Bank, in an interview with US Ambassador Max Foul in 2008, according to a US Embassy telegraph that has now been made public through WikiLeas. At the end of the year, Roy Gador, the then president of the Good Finance, told the Americans that the stores were closed and he could not buy Christmas presents.
At the end of last week, Good Finance published 20,000 new telegraphs from the US Embassy, including more than a thousand Hungarian-related ones, processes telegrams continuously.
ABC President Sean Cole opposed foreign currency debtors during his conversation with Max Foul, the then US Ambassador at the end of 2008, according to a news release Simon sent on Friday, October 30, 2008 from the US Embassy in Hungary. Simon said in a telegram that it would not be right to save foreign currency debtors (in the original, “foreign currency debtors should not be saved”) because “we must finally learn that there is no free lunch”.
Simon also stated in a private interview with the ambassador that there is no effective means of curbing foreign currency loans and that Hungarians must learn to “do the right thing, just because it is right” and not because they are forced to. At the end of 2008, Sean Cole made a similar statement publicly: “At the moment, there is no need to save foreign currency borrowers.” (The Central Bank of Hungary’s central rate of the Swiss franc was HUF 174.29 on October 29, HUF 172.74 on October 30, and HUF 178.29 on October 31; however, since July, the exchange rate has increased by more than HUF 30, or twenty percent October.)
The document, which has just been released, is one of 283 telegrams sent from Buddha to the US Department of State and last week published by Good Finance, along with more than two hundred thousand other telegrams. Simon’s report on foreign currency debtors is non-confidential, according to the Department of State’s internal classification as “unclassified”. However, the top of the telegram is marked “for official use only”.
Briefly exploring the current situation, the telegram reveals that a week earlier Raymond Grachy announced an agreement with the Banking Association. This means trying to relieve households of the burden of monthly repayments due to the weak forint. Under the agreement, they would relax the terms of the repayments, allow the maturity to be extended so that monthly repayments could be reduced, and allow debtors to convert their foreign currency loans into forint.
While most people expect and hope that the IMF package will strengthen and stabilize the exchange rate of the forint, many over the past few days fear that the weakening of the forint will have a serious impact on households with foreign currency-based housing or car loans, says Ambassador. they refer several times to Sean Cole, central bank governor.
One day before the letter of the US Ambassador, on the morning of October 29, Hungarian leaders agreed with the IMF, the EU and the World Bank that they would provide Hungary with a EUR 20 billion credit line to help Hungary avoid bankruptcy.
The letter of the Ambassador also mentions that in a very short time the foreign currency loans (primarily Swiss franc, secondly the euro) of individuals and companies have swelled. In 2003, foreign currency loans accounted for only 5 percent of all retail loans, and less than five years later, 62 percent of loans were denominated in foreign currency.
Only the subsidized forint interest rates were competitive with foreign currency interest rates in the early 2000s, but at the end of 2003 the government reduced interest rate subsidies and in the autumn of 2006 also abolished the tax allowance on forint loans.
According to another telegram, in December 2008, Sean Cole thought extra measures were needed to get banks to lend to small and medium-sized enterprises in Hungary. According to the central bank’s president, in the last quarter of 2008, banks had about $ 1,000 billion more money than they had in the previous three months due to the lowering of the minimum reserve ratio, but they “didn’t let it out.”
Simon, on the other hand, believed that the use of extra incentives in “normal times” was not the task of the central bank, but felt that this time it might be necessary to make an exception. According to him, lending is a business decision of the banks, “but today’s times are not normal,” the telegram says.
The ambassador also exemplifies the case of Roy Gador, President of the Good Finance. Referring to George Blaine, a senior analyst at B&L Bank, they point out first that if government measures are not taken and market liquidity does not return to pre-crisis levels, more and more domestic businesses may go bankrupt. In support of this, reference is made to Roy Gador, who said the day before the telegram date to a group of ambassadors that “he found most stores empty or closed during his Christmas shopping”.