[Congressional Record Volume 144, Number 39 (Tuesday, March 31, 1998)]
[House]
[Pages H1835-H1836]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
REFORM OF THE INTERNATIONAL MONETARY FUND
The SPEAKER pro tempore. Under a previous order of the House, the
gentleman from New Jersey (Mr. Saxton) is recognized for 5 minutes.
Mr. SAXTON. Mr. Speaker, as chair of the Joint Economic Committee,
sometime ago I began or the Joint Economic Committee began a review of
a proposal which came to us from the International Monetary Fund
through the Treasury of the United States. Secretary Rubin, in essence,
passed along the request of the International Monetary Fund, the IMF,
for an appropriation of $18 billion to, in their words, permit the IMF
to continue their work.
It is interesting, Mr. Speaker. The IMF, which was established in
1945, over the years since 1945 has had a total, a quota appropriated
to it, of about 36 billion U.S. dollars. So one might ask why it would
be that the IMF would come to us today and in one lump sum request the
appropriation of $18 billion, a 50 percent increase in 1 year over what
they have had over the past 50-some odd years?
So we began to look at this as a very serious matter. This is $18
billion of U.S. taxpayers' money that would be used for purposes around
the world; for perhaps good purposes, in some instances, and perhaps
for questionable purposes in other instances; but $18 billion, billion
with a B, of U.S. taxpayers' funds.
So when we began to look at the operations of the IMF, we noticed
that something was quite peculiar. That was that, after a great deal of
study, we determined that the average amount of interest that the IMF
obtains in making its loans to risky creditors in other countries is
about 4.7 percent; that is right, 4.7 percent.
By today's standards, or by any standards in the modern world, 4.7
percent is a fairly low interest rate. Americans who buy homes pay in
the neighborhood of 7 percent. Americans in this day and age who buy
cars pay an interest of 9 or 9\1/2\ percent. Americans who use credit
cards pay interest rates from 18 to 24 percent. So 4.7 percent interest
is a relatively low interest rate.
After we determined that this was the case, we drafted some
legislation to try to change the way the IMF does business. Mr.
Speaker, we did not suggest that the $18 billion of American taxpayers'
money should be forwarded, appropriated and forwarded to the
International Monetary Fund. We said, before we even consider sending
them another dime, that we ought to change the rules as we see them, as
we participate in the IMF, as to how it operates. They would be some
fairly simple and straightforward changes.
The first change would involve our ability to find out what the IMF
is
[[Page H1836]]
doing, why they make their decisions and how they make them. Because
today they do it in secret, Mr. Speaker. They do it in secret. And, as
a matter of fact, even when Members of Congress ask why the decisions
were made that were made, we cannot see their minutes, we cannot see
their reports, we cannot see the studies of the results of what they
obtained. So we are requesting to be able to see into their procedures:
transparency, we call that.
We also introduced in the same bill, which happens to be H.R. 3331, a
provision that would require them to use American dollars, both in the
case of the $36 billion they already have and in the case of whatever
we may appropriate in the future, and that they loan at market interest
rates, adjusted for risk.
That is an important factor, because, Mr. Speaker, if you have the
opportunity to go out and borrow some money, if you are a lender and
you start loaning at 4.7 percent, believe me, you have lots of
customers. So we would require that they loan at market rates, and we
would also require that they establish an independent advisory board
that would report to the public periodically about their activities.
The reason for me taking the floor to explain this tonight, because I
have done this before, is that a very prestigious organization in
Washington, the Heritage Foundation, will soon release a report, a
draft of which I have here. They support the notions and the concepts
contained in H.R. 3331.
They say, for example, that with regard to the issue of being able to
see what the IMF does, they say, ``Demands for greater transparency are
a part of nearly every piece of legislation involving the IMF.''
Mr. Speaker, I include for the Record an article by Brett Schaefer on
this subject.
The material referred to is as follows:
How Congress Should Reform the International Monetary Fund
(Brett D. Schaefer)
Recent weeks have seen vigorous debate in Congress over
America's participation in and funding of the International
Monetary Fund (IMF). Both the Senate and the House of
Representatives have passed supplemental appropriations bills
containing the $17.9 billion requested by the Administration
for the IMF. Both bills request specific reforms in IMF
operations or policy. Unfortunately, either these reforms
would have little impact on the current operations of the
IMF, or they are completely unenforceable.
Congress should utilize the rare opportunity offered by
this legislation to reform the economically harmful
activities of the IMF.\1\ Short of denying funding for or
eliminating the IMF, the best way for Congress to correct its
failings would be by enacting legislation like The IMF
Transparency and Efficiency Act of 1998 (H.R. 3331),
sponsored by Representatives Jim Saxton (R-NJ), Richard K.
Armey (R-TX), and Tom Campbell (R-CA). This bill attempts to
shine a bright light on the internal workings of the IMF,
which have been all too often closed to outside scrutiny. In
addition, it would mitigate the market distortion caused by
IMF loans. It requires the IMF to charge market interest
rates on its loans, and establish an independent review board
to examine its policies, practices, and results. Finally,
H.R. 3331 contains the most stringent enforcement measures of
any current reform proposal.
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\1\ For detailed criticism of the IMF and the detrimental
effects of its policies on developing countries and the
global economy see: Bryan T. Johnson and Brett D. Schaefer,
``Congress Should Give No More Funds to the IMF,'' Heritage
Foundation Backgrounder No. 1157, February 12, 1998; ``No New
Funding for the IMF,'' Heritage Foundation Backgrounder
Update No. 287, September 23, 1997; and ``The International
Monetary Fund: Outdated, Ineffective, and Unnecessary,''
Heritage Foundation Backgrounder No. 1113, May 6, 1997; Bryan
T. Johnson, and John Sweeney, ``Down the Drain: Why the IMF
Bailout in Asia is Wasteful and Won't Work,'' Heritage
Foundation Backgrounder No. 1150, December 5, 1997.
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current legislation
The Senate passed a supplemental appropriations bill on
March 26, 1998, to grant the Administration's request for
$17.9 billion for the IMF. Negotiations between the
Administration and the leadership in the Senate resulted in
changes that greatly weakened the reforms demanded by earlier
versions of the bill. For example, instead of demanding that
the IMF pass a resolution to change its loan policies, a
provision approved in the earlier version by the Senate
Appropriations Committee, the new agreement only requires the
Secretary of the Treasury to certify that the world's seven
largest economies--the so-called Group of 7 (G-7) nations--
agree to use their influence to push two specific reforms in
IMF policies.\2\ These reforms would obligate recipients of
IMF assistance to: (1) end government subsidies and directed
lending and (2) comply with international trade agreements.
This deal removed the provision in the original legislation
that would punish the IMF for failing to enact
congressionally mandated reforms. Instead of demanding
concrete results on reform before granting money to the IMF,
the legislation recently passed by the Senate merely requests
a nebulous promise from the G-7 countries to pursue reform.
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\2\ The G-7 includes Canada, France, German, Italy, Japan,
the United Kingdom, and the United States. It meets
periodically to coordinate economic policies, discuss
treaties or agreements, and issue policy statements. The G-7
are the seven largest contributors to the IMF and control
44.82 percent of its votes, according to the 1997 IMF Annual
Report.
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The Appropriations Committee in the House of
Representatives passed two supplemental appropriations bills
on March 24, 1998. One contains appropriations for both the
IMF and the United States' arrears to the United Nations, and
the other provides funding for U.S. participation in the
Bosnia peacekeeping mission, military expenses in the Middle
East, and disaster relief. The reform provisions for the IMF
in the House bill are very similar to those originally
present in the Senate bill. Specifically, before the funds
appropriated in the bill could be dispersed, transferred, or
made available to the IMF, the Secretary of the Treasury must
certify that the IMF Board of Executive Directors had passed
a resolution requiring every user of IMF resources to: (1)
comply with all international trade agreements and
obligations to which the borrower is a party; (2) eliminate
government directed lending or subsidies; and (3) guarantee
that countries would not discriminate between domestic and
foreign creditors or debtors when resolving debt problems.
In addition, the House bill includes three directives that
(1) the Treasury report on advances in financial
transparency, application of internationally accepted
accounting practices, elimination of subsidies, and improving
the effect of IMF assistance on worker's rights; (2) the
President ensure that no U.S. resources are ``made available,
directly or indirectly, to promote unfair competition against
the American semi-conductor industry''; and (3) the IMF
member countries establish an advisory commission on the
international financial system.
Although the House bill is stricter than the Senate
legislation, it remains far from ideal. Both would give the
IMF $17.9 billion--the entire Administration request--with
ineffective or unenforceable conditions, and would result in
little change in how the IMF does business, which is the root
of the problem.
the imf transparency and efficiency act of 1998
As a lender of last resort, the IMF disrupts the global
market. Worse, the secretive nature of the IMF prevents any
accurate evaluation of the extent of this disruption. The
problem, therefore, is not that the IMF lacks sufficient
funds, but that its distribution of subsidized loans and its
secretive nature reward poor governance, encourage excessive
risk-taking by investors, and conceal information necessary
to counter these effects. The best way to avoid these
outcomes would be to shun these kinds of subsidized loans
altogether. Short of eliminating the IMF, which would be the
ideal solution, Congress can focus on mitigating the more
harmful consequences of IMF lending.
The best vehicle for achieving this goal is The IMF
Transparency and Efficiency Act of 1998 (H.R. 3331),
sponsored by Representative Jim Saxton (R-NJ), Richard K.
Armey (R-TX), and Tom Campbell (R-CA). H.R. 3331 demands that
the Executive Directors of the IMF initiate specific reforms:
Increase transparency. Demands for greater transparency are
a part of nearly every piece of legislation involving IMF
reform. Despite Congress's appropriation of $17.9 billion in
American taxpayer dollars to the IMF, the organization
refuses to grant Congress or the American public timely
access to the minutes of its board meetings, its loan
agreements, and its performance evaluations.
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