d projects in the private sector. Some of these loans, investments, and projects had a risk factor that was extremely high... so high, in fact, that any other bank in the world wouldn't even consider funding a project with a risk that high. It seems that the governments especially favored investment in a particular firm or industry in which to invest (which was almost always the real estate industry). Many times, the projects that these firms came up with seemed to overlook the risk factor of their future endeavors altogether. Apparently, because the different governments were so eager to bail out and/or intervene on the part of a firm with a project-gone-bad , acting almost as "loan-insurance", everyone took that as all the more reason to throw money into whatever investment came along. Another facet to the corporate borrowing scheme was that often times the financial institutions were pulling out loans from overseas banks to make loans in the domestic sector. This is not necessarily a bad thing. For example, if a country with very high prospects for the returns on the investments follows this procedure then it can be a very successful way to raise capital. A country can successfully borrow and pay off the loan only when there are good prospects. However, a country that is less solvent will run into problems. When the return on the investment is lower than the cost of the investment (i.e.- the returns are not as high as the interest payments), the country will not be able to pay off its foreign debt. Of course, this just creates a dangerous cycle that is hard to break. This is what happened in Asia. Loans from foreign financial institutions were made to private and public lending institutions in Asia; however, the returns in the Asian markets were not yielding anything. And worse yet, even when the signs showed that the numbers were negative, loans were continually drawn from foreign banks to cover unsuccessful operations. It became, i...
