-36-                                          
         this declaration, some U.S. banks, including petitioner, announced           
         that they would place a portion of their Brazilian loans on                  
         nonaccrual status, recording interest income on such loans only as           
         payments were received. By November 1987, Brazil resumed partial             
         interest payments on its external indebtedness.                              
              B.  Petitioner's Blocked Deposits                                       
              Petitioner's subsidiary, Norwest Bank Minneapolis, N.A. (NBM),          
         owned blocked deposits at the Central Bank in 1986 and 1987.20  As           
         described above, these deposits consisted of principal repayments            
         of dollar-denominated loans previously made to Brazil in the                 
         ordinary course of NBM's banking business. The Central Bank                  
         prevented petitioner from repatriating these deposits because Brazil         
         had insufficient hard currency (U.S. dollars) to make payments on            
         the  loans. At petitioner's election, the blocked deposits accrued           
         interest at the U.S. domestic rate.                                          
              In late 1986, petitioner began investigating the possibility            
         of using some of its Brazilian blocked deposits to make an equity            
         investment in a Brazilian company.  Darin P. Narayana managed                
         international banking for Norwest at this time and was in charge of          
         petitioner's Brazilian blocked deposits.  A debt-equity conversion           
         became attractive to petitioner because it would: (1) Allow                  
         petitioner to regain control over some assets by placing them                
               20   Because NBM was a subsidiary of petitioner, for                   
          convenience we sometimes refer to petitioner as owner of the                
          blocked deposits.                                                           
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