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Federal Reserve Bank of St. Louis
Collection: Paul A. Volcker Papers
Call Number: MC279
Box 29
Preferred Citation: Memos for Files, 1981, 1987; Paul A. Volcker Papers, Box 29; Public Policy
Papers, Department of Rare Books and Special Collections, Princeton University Library
Find it online: http://findingaids.princeton.edu/collections/MC279/c218 and
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Removal Notice
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Citation Information
Document Type: Board of Governors
Citations:
Number of Pages Removed: 11
Restricted-Controlled: "Memorandum of Conversation, President Lusinchi and Chairman
Volcker," May 11, 1987.
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BOARDOFGOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
To
Files
From
Dick Syron
Date
•:
Subject: visit of ChariPs Pistor and
Gene Fiedorek to Chairman Volcker
on July 30, 1981
Charles Pistor, Chairman, and Gene Fiedorek, Executive Vice
President, Republic National Bank of Dallas, came to see Chairman
Volcker at about 12 Noon on July 30, 1981; I sat in on their meeting.
Mr. Pistor indicated that Republic had been interested for some time
in obtaining a larger share of the bank business of the Hunt Brothers
of Dallas and their related entities. In that regard Republic was
interested in taking the lead in refinancing the current loan agreement between Placid Oil Corporation and a consortium of banks -led by Morgan Guaranty Trust and The First National Bank of Dallas -which was arranged in April 1980 for the purpose of restructuring the
Hunt Brothers' silver indebtedness. Mr. Pistor said that Republic
would be interested in putting together a loan syndicate, with
extensive participation of overseas banks, to refinance the Placid
loan by making a new $1 billion loan to Placid secured by oil production from Placid's Black Lake oil field.
Mr. Pistor and Mr. Fiedorek were generally aware that at the
time the Placid loan was made the Chairman had interposed no objection
under the Voluntary Credit Restraint Program then in effect, on the
understanding that the purpose of the loan was only to restructure
the Hunt indebtedness and provide for an orderly disposition of the
Hunt silver and that the loan agreement included protections against
renewed speculative activity on the part of the Hunts. (Chairman
Volcker recently reminded by letter the lead banks in the loan group
of the importance he placed on the stipulations of the loan agreement
containing these protections.)
Mr. Pistor said that he was aware of the Chairman's concerns that
bank credit not be used for speculative activity by the Hunts and that
was why he had come in. Mr. Pistor indicated that under the provisions
of the existing loan agreement the Hunts would be forced to sell silver
at a substantial loss and that the brothers did not believe that it
was the intent of the loan agreement to force them to do that.
Mr. Pistor also said that the Hunts believed the silver market was
currently very depressed and that the possibility of their having to
sell a substantial volume was a constant threat over the market.
Chairman Volcker responded that he could understand the reason
for Republic's interest but that it would be very difficult to accomplish
what they were trying to do without weakening the protections he felt
were essential in the current Placid loan agreement. The Chairman
said that it was not his direct concern whether the Hunts made or lost
money on the silver they sold to make payments associated with the
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Federal Reserve Bank of St. Louis
I
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current loan agreement and that the Hunts had appeared reluctant to
sell silver for some time now, including periods during which its
price was considerably above the current level. He noted that a
specific purpose of the loan agreement was to provide for the
orderly liquidation of the Hunt silver and to this point little
silver had been sold, regardless of the market price, but that the
Hunts now seemed to feel under more pressure to sell. The Chairman
said if the objective of a refinancing led by Republic was to allow
the Hunts to avoid the purposes and protections of the existing loan
agreement in order to continue holding silver, he would strongly
object.
Mr. Pistor and Mr. Fiedorek said they understood how the
Chairman felt. The possibility was raised of the Hunts somehow
transferring control of the silver to some third party who would
sell it over some fixed time period. Mr. Pistor asked if Republic
could "go back to its drawing board" to see if it was possible to
develop a proposal that would be helpful to the Hunts while at the
same time addressing Chairman Volcker's concerns. The Chairman
replied that he understood Republic's position and that they could,
of course, try to develop such a proposal but that he thought it
would be very difficult if not impossible to do so. Mr. Pistor
said he would get back to the Chairman if Republic was able to
develop what he thought would be a mutually acceptable approach to
a refinancing of the loan agreement.
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