Part 3 Chapter 30 Sheiks Summary and Analysis

The 1970s bring further changes in the financial world. There is a recession in 1973-1974 caused by the Arab oil embargo. The system of fixed exchange rates collapses and there is intensive foreign exchange speculation that eventually causes the closing of Franklin National Bank and Bankhaus Herstatt. Morgan Guaranty and three other U.S. banks begin to accept petrodollars from Arab clients. Morgan has relationship with the Saudis dating back to the 1930s. Guaranty Trust has functioned as the Saudi banker since the 1930s and the formation of Aramco. The bank handles the Aramco account.

The Saudis form a central bank in 1952 called the Saudi Arabian Monetary Agency or SAMA. Many SAMA funds are deposited with Morgan Guaranty. SAMA is talked into opening the Saudi International Bank with part owner Morgan Guaranty and other banks in 1975 in...