[Congressional Record Volume 144, Number 34 (Tuesday, March 24, 1998)]
[House]
[Page H1409]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 IMF SHOULD REEVALUATE LENDING POLICIES

  (Mr. SAXTON asked and was given permission to address the House for 1 
minute and to revise and extend his remarks and include extraneous 
material.)
  Mr. SAXTON. Mr. Speaker, during the past several months, I have 
warned time and again that the International Monetary Fund's lending 
policies are counterproductive. That is because they lend at rates far 
below market rates. That practice, in and of itself, generates demand 
for even more low interest rate loans. That is called moral hazard.
  Yesterday's Financial Times, published in the U.K., reported that 
European central bankers agree with my position. They attack the 
bailout practices of the IMF, and they say it will be putting forward 
proposals next month that would involve commercial banks at an earlier 
stage.
  The criticism reflects concern about the IMF's handling of the Asia 
financial crisis. Hans Tietmeyer, president of the Bundesbank said, the 
multibillion dollar international rescue plans for Thailand, South 
Korea, Malaysia and Indonesia could encourage reckless banking 
practices. The IMF should reevaluate its policies, he said.
  Mr. Speaker, I include the following for the Record:

                        [Monday, Mar. 23, 1998]

             Criticism: EU Bankers Hit at IMF on Bail-Outs

             (By Wolfgang Muchau and Lionel Barber in York)

       European Union central bankers have attacked the bail-out 
     practices of the International Monetary Fund and will be 
     putting forward proposals next month that would involve 
     commercial banks at an earlier stage.
       The criticism reflects concern about the IMF's handling of 
     the Asia financial crisis. It also signals the EU's intention 
     to raise its profile in international financial institutions 
     as 11 European countries prepare to adopt a single currency 
     next January.
       The US has dominated the policy agenda of the IMF, even 
     though EU countries have a larger combined shareholding.
       Hans Tietmeyer, president of the Bundesbank, speaking after 
     the informal meeting of EU economies and finance ministers at 
     the weekend, said the multi-billion-dollar international 
     rescue plans for Thailand, South Korea, Malaysia and 
     Indonesia could encourage reckless bank lending.
       ``The IMF should re-evaluate its policies and should 
     question itself on how far its policy generates moral hazard. 
     The IMF should consider whether it is better to tackle 
     problems with large sums of bail-out money or whether it 
     might be better to involve private sector creditors at an 
     earlier stage,'' he said.
       Mr. Tietmeyer said he had drawn up proposals which he would 
     present to the IMF's interim committee at its next meeting on 
     April 16 in Washington.
       He did not divulge details of the programme, but a key 
     element is believed to include regular monitoring of private 
     sector debt.
       At the meeting, EU central bankers also discussed the 
     possible dangers of electronic money to monetary policy under 
     Emu. Smart cards with computer chips are becoming 
     increasingly popular, but central bankers are worried because 
     this is a form of money that operates outside the control of 
     central banks.
       The bankers are particularly concerned that the transition 
     period between the launch of monetary union in January and 
     the introduction of euro notes and coins in 2002 could 
     encourage the use of electronic money.
       Mr. Tietmeyer called on the European Commission to consider 
     regulating the markets for electronic money and electronic 
     banking, restricting its use only to established banks

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