[Congressional Record Volume 144, Number 5 (Tuesday, February 3, 1998)]
[House]
[Pages H104-H105]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           BAILOUT OF THE IMF

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 21, 1997, the gentleman from Florida (Mr. Stearns) is 
recognized during morning hour debates for 5 minutes.
  Mr. STEARNS. Mr. Speaker, this morning I would like to call my 
colleagues' attention to an op-ed in the Wall Street Journal this 
morning called ``Who Needs the IMF?'' It is written by George Schultz, 
who is the former Secretary of State under President Reagan; Mr. 
William Simon, who was Secretary of Treasury under Presidents Nixon and 
Ford; and Mr. Riften, who is a former Chairman of Citicorp/Citibank.
  The American taxpayers are being asked to bail out the IMF, and I 
believe they are being taken advantage of.

                              {time}  1245

  The bailout has been organized by the IMF fund to which the United 
States has contributed roughly 18 percent of the IMF's reserve fund. 
The IMF, as of 1996, there was about $210 billion in the reserve fund. 
The United States has been liable for approximately $47 billion of 
this. This fund has responded to the East Asian financial crisis by 
nearly liquidating its assets. Thailand has received $17 billion in 
bailout money; $40 billion has been handed to Indonesia, and South 
Korea has been given a staggering $68 billion in funds. The total cost 
of this bailout amounts to more than 14 percent of East Asia's gross 
domestic product.

[[Page H105]]

  Let us put this in perspective: 14 percent of the U.S. gross domestic 
product would equal over $1 trillion. This breathtaking figure would be 
61 percent of the Federal budget. The IMF is engaging in a policy of 
privatizing the profits and socializing the losses. So instead of 
helping beleaguered nations, the American taxpayer is guaranteeing a 
return of investment, of course with a profit attached, to the various 
investment institutions and investors who knew that they were engaging 
in highly risky investments. The protected markets, not the open ones, 
are in trouble.
  The financial crisis in East Asia is not the result of excess 
capitalism. The crisis has been caused and exacerbated by the Asian 
economies that have been forcibly insulated from the free market 
through quasi-protectionist practices, especially as it concerns 
banning foreign financial services to operate in these markets.
  The Heritage Foundation, a conservative think tank, reports, quote, 
the financial crisis in Asia is a culmination of decades of hands-on 
government regulation of the region's economies, distrust of foreign 
capital and competition, concentration of power in a family-owned 
business group with close ties to the government, and closed financial 
systems and quotes.
  As the case with Japan, which has experienced nearly a decade-long 
recession, these Asian nations have created managed economies by 
picking economic winners and losers instead of allowing competition to 
sort out the free market winners and losers. By trying to guide their 
economies through bureaucratic hands, Thailand, Indonesia, and South 
Korea have worsened their economic crisis because they have been 
incapable of taking immediate action to fight the effects of a growing 
economic free fall. The IMF can lull nations into complacency by acting 
as a self-appointed leader of last resort.
  This fund was originally created in 1944 to assist in global trade by 
supporting currency convertibility and providing needed financing to 
defend exchange rates. The purpose of the IMF was entirely dissolved 
with the demise of the fixed exchange system in 1937 and the advent of 
international capital markets. But instead of putting the IMF out of 
business as it should have been, the IMF was allowed by its member 
nations to redefine itself by becoming a lender to developing nations. 
Such a change in its mandate automatically increased the risk to its 
reserve funds and duplicated the efforts of other international 
financial institutions such as the World Bank.
  The IMF money has made investors more reckless with their decisions 
because they have come to expect that this money will be an insurance 
plan against the risk of investing in questionable economic settings in 
foreign nations. They realize their investments will be practically 
guaranteed. Instead of making wise business decisions, certain 
investors and institutions get consumed with the thought of great 
profits despite significant risks.
  Most importantly this crisis should teach the world, especially in 
countries like Japan and China, that true economic reform is needed to 
wean nations off managed economic policies. By allowing the free market 
to rule, the nations of East Asia will have the security to avoid these 
economic downturns that currently have befallen them. Asian nations are 
facing financial difficulties, not because of outside forces having 
imposed bad economic policies on them, but because they have imposed 
these bad policies on themselves.

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