[Congressional Record Volume 144, Number 81 (Friday, June 19, 1998)]
[House]
[Pages H4873-H4876]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STOP CODDLING YELTSIN
The SPEAKER pro tempore. Under a previous order of the House, the
gentleman from New York (Mr. Solomon) is recognized for 5 minutes.
Mr. SOLOMON. Mr. Speaker, I would like to insert for the record an
excellent article on Russia policy by our colleague Ben Gilman, the
Chairman of the International Relations Committee.
Unlike the Clinton administration, Chairman Gilman cuts to the heart
of the matter concerning Russia's economic problems. Instead of the
simple-minded, knee-jerk reaction of giving the Russian government more
money, as President Clinton has proposed, Chairman Gilman correctly
places the blame, and responsibility, for Russia's woes where it
belongs: squarely on the shoulders of the Russian government.
This massively corrupt regime, composed almost entirely of former
Communist party bureaucrats, has engaged in wholesale theft of money
and wealth that properly belongs to Russian, American, and
international taxpayers.
It is a scandal of worldwide proportions and it has been not just
neglected, but in fact contributed to, by the Clinton administration's
policy of maintaining a wide open spigot of taxpayer money to the
Russian government, unlinked in any way to Russian government behavior
or policy.
Chairman Gilman has done us a favor by enlightening us with this
article, Mr. Speaker. Let us hope that the Administration, and this
Congress, heed his advice to at least temporarily stanch the money flow
to the Russian regime and begin demanding real economic reform and
better foreign policy behavior from Boris Yeltsin.
Stop Coddling Yeltsin
President Clinton has announced his support for a possible
new IMF loan to Russia, potentially totaling $10 billion.
Instead of rushing to provide that assistance to President
Boris Yeltsin's government, we ought to stop, ask some
questions and seek changes in Russian policies.
Russian foreign policy today appears to have one
unfortunate objective. With his oft-repeated mantra of
seeking a ``multipolar world,'' Yeltsin's foreign minister
and foreign director of Russia's intelligence service,
Yevgeny Primakov, appears intent on creating challenges to
America's global leadership, challenges we must assume the
United States will overcome only after providing concessions
to Russia.
Thus, just as the United States seeks to persuade Russia to
participate in the larger effort by the community of nations
to fight proliferation of weapons of mass destruction,
enforce United Nations mandates in places such as Iraq and
pursue solutions to other global problems, Primakov appears
more interested in pursuing a price for Russia's cooperation.
Despite American concerns, the Yeltsin government has
extensive relations with Iran, a supporter of international
terrorism intent on becoming a regional military power in the
Persian Gulf. Russia provides advanced weapons and military
technology to China, likely to contribute to future
challenges to the ability of American forces to defend our
friends in the Pacific, as Chinese missile firings off Taiwan
have portended, Communist Cuba, with Russian encouragement,
continues to seek Soviet-design reactors, despite American
concerns.
As America seeks to stabilize the former Soviet states,
Russia has involved itself in ethnic conflicts on its
periphery through covert arms supplies and other means, and
has cut its neighbors' access to energy pipelines. Moscow has
failed to ratify the START II arms reduction treaty and
demands questionable revisions in other arms treaties. Oddly,
despite its financial constraints, the Yeltsin government has
found the means to help finance the Soviet-style dictatorship
of President Alexander Lukashenko in Belarus.
Yeltsin's government is characterized as ``reform-minded''
but suffering from massive tax evasion. The reality is a bit
different. Yeltsin's personal support for reforms has in fact
been inconsistent. At key points since 1991, he has simply
withdrawn to his dacha, leaving lower officials to fend for
themselves. At other times he has reversed steps needed to
move forward.
But this unwillingness to pursue reforms vigorously has now
caught up with Yeltsin. Despite massive debt rescheduling,
private loans, considerable foreign aid and large loans from
the IMF and World Bank, Russia is now approaching a fiscal
train wreck. The pain of planned budget cuts might indeed be
alleviated by an additional IMF loan, but another worrisome
reality in Russia--corruption and related flight of capital--
underlines how temporary that relief would be.
Veniyamin Sokolov, a director of the Russian equivalent of
the U.S. General Accounting Office, recently visited the
United
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States, speaking of the routine theft of money from Russian
government and industry. Russian nuclear reactor operators,
coal miners and other average workers have protested over
unpaid wages in recent years. It would seem that that problem
can now be traced to such theft.
A recent study brings home to us the consequences of this,
estimating that while Russia's foreign borrowings in recent
years have totaled $99 billion, a full $103 billion in
capital has been spirited out of the country. Thus, much that
Russia has borrowed has not gone into productive investment
to create a bigger tax base but has instead filled the gaps
left by the disappearance of billions of dollars worth of
Russian capital. Meanwhile, Russian households and
entrepreneurs starve for such capital, operating on a barter
basis, which, again, cuts into Russia's tax base.
Now Russia's borrowing to pay its bills has created
burgeoning short-term debt payments. Last year, a quarter of
the government budget went to pay debt interest, and that
figure will now rise.
Boris Yeltsin cannot simply make bellicose statements about
tax cheats and resume business as usual. And American
officials should not rationalize new loans by simplistically
depicting a ``reform-minded'' government. It is also not an
answer to say that without loans nuclear-armed Russia would
fall apart, with subsequent instability placing America at
risk. Given current trends in Russia, such instability is
already likely, and soon, unless President Clinton insists on
real change in Russian foreign and domestic policy now.
If President Yeltsin fails to attack corruption at the
highest levels, Russian money will continue to disappear--and
the Russian people's patience is not limitless. Unless
Yeltsin engages in comprehensive economic reform--and stays
engaged--foreign investment in Russia will not grow. Finally,
if President Yeltsin doesn't begin to work sincerely with the
United States to prevent proliferation of weapons of mass
destruction to countries such as Iran and Iraq, and to
resolve ethnic conflicts, particularly in the Balkans and the
Caucasus, Russian domestic instability will be compounded by
growing instability outside Russia's borders.
This is a pivotal moment in our relationship with Russia.
Now is the time to insist on steps by President Yeltsin that
will put the American-Russian relationship--and reforms in
Russia--back on the right track.
INTERNATIONAL MONETARY FUND
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 7, 1997, the gentleman from New Jersey (Mr. Saxton) is
recognized for 60 minutes as the designee of the majority leader.
Mr. SAXTON. Mr. Speaker, I have taken this time today to talk about
an issue which I think is of extreme importance to the American people
and, I must say, one that does not get front-page newspaper attention
very often. That issue involves a request by our administration for $18
billion to fund the International Monetary Fund.
As I said, this is not always a front-burner issue, and so I take
this time today to reflect on it inasmuch as Vice President Gore
yesterday made some rather disparaging remarks about those of us who do
not share his position that it would be timely at this time to vote for
an appropriation of $18 billion to add to the International Monetary
Fund.
Mr. Speaker, yesterday Vice President Gore, I think, made some rather
exaggerated and unfortunate political remarks on a variety of subjects
including this one:
According to press reports today the Vice President labeled opponents
of the IMF appropriation, or at least those of us who would like to
reform the IMF operation along with some kind of an appropriation, the
Vice President labeled us as under the influence of a dangerous and
growing isolationism.
Mr. Speaker, this attempt to associate IMF reformers with
isolationism is simply not credible.
In recent months I have talked to a number of economists who are
opposed to the IMF operation as it stands today. Some of these
economists have testified before us at the Joint Economic Committee as
well as other committees here in the Congress both in this House and in
the other body. If we have disagreements of policy, we ought to talk
about it. But not one of the economists critical of the IMF was an
isolationist or a protectionist, and neither am I. If we have these
disagreements, they ought to be discussed openly, and that is why I am
here today.
Let us talk about these issues: transparency, moral hazard,
subsidized interest rates, taxpayer exposure and other conditions that
are associated with IMF loans to other countries. Unfortunately the
Vice President seems more inclined to score partisan points rather than
to discuss the substance of IMF issues.
Mr. Speaker, let me discuss these issues one at a time.
First, the amount of money that the IMF has at its disposal and then
what it has requested through our administration as an additional
appropriation or quota. Second, the issue of moral hazard, which
essentially means loaning money at subsidized interest rates. Three,
conditions that are associated with IMF loans which have oftentimes
proven to be less than helpful to the receiving economies that we are
trying to boost up. Fourth, the issue of secrecy. The IMF does operate
largely in a cloak of secrecy, and therefore a fourth point that I will
discuss this afternoon is that of more transparency for the IMF. Fifth,
exposure of taxpayer dollars. Yes, if we vote for an appropriation of
$18 billion, there surely will be an exposure of taxpayers' dollars,
and $18 billion even here in Washington, Mr. Speaker, as you know is
still a lot of money. And six, the sixth point that I would like to
speak on this afternoon is that the IMF, the International Monetary
Fund, does have available assets at its disposal which it has as of
this date left remained untapped, and depending on how you count that
can be as much as very close to 80 or $90 billion.
So let me begin by saying what got my attention on this issue almost
a year ago was the amount of money that the IMF today has in its
coffers which have come from the United States Treasury and their
current request for 18 or $17.9 billion, and I am going to say 18
billion because it is a round number. Actually the number for the
record, Mr. Speaker, is 17.9 billion, pretty close to 18 billion.
Since 1945, when the IMF was put into business for the first time,
our total appropriations, called a quota, total quota dollars to the
IMF have been $36 billion. Last summer the IMF came to the Department
of the Treasury and Treasury Secretary Rubin came to the Congress and
said they needed an extra $18 billion.
Now you do not have to be an expert at arithmetic or math to
understand that $18 billion is about 50 percent of what we have given
them since 1945, and, Mr. Speaker, I would point out to all those who
are listening that $18 billion is a tremendous amount of money
particularly in light of the fact that we are fighting here every day
to keep our budget balanced. $18 billion, a 50 percent increase, Mr.
Speaker, in 1 year after 45 years of accumulating expenditures, which
now have come to $36 billion; it seems like a lot to ask us to do, $18
billion in one single appropriation.
And I was surprised, therefore, to find out even after that request
came to us that that is about half what they think they will need. In
other words, if they have already gotten 36 billion, and they have now
indicated that they are going to come back in a few years for another
$18 billion, that means they want to increase our quota by a hundred
percent or very close to it.
And so I begin to ask myself, I said this is very curious. For the
past 53 years we have given or lent them $36 billion, and in 1 year
they came back and wanted 18. There must be some reason for this. So we
began to study almost a year ago what it is the IMF does with our money
and why it is that they might need this kind of an increase. And we
found, Mr. Speaker, that in countries recently like Korea, and Russia,
and Indonesia, and Thailand large amounts of money have been left to
institutions in those countries to help bolster their economic
position, and what we found, Mr. Speaker, was that these loans on
average over the last decade or so have averaged about 4.7 percent in
terms of the interest rate that the IMF charges with moneys that we
have provided and, I must say, that other countries have provided as
well.
Now I would ask anyone who is listening today if they could get a
loan in today's market at 4.7 percent, I dare say that there would be a
lot of people who would be anxious to get those kinds of loans, and, as
a matter of fact, that is exactly what happens with the countries
around the world where these loans are offered at 4.7 percent. They
like this program, and so, as their economies begin to falter for one
reason or another, perhaps it is because of faults that are inherent in
their banking systems; we had a banking system problem here a few years
ago when we
[[Page H4875]]
had savings and loans fail; perhaps it is something like that or
perhaps there are some other economic difficulties in some of their
institutions in their countries, and they say, ``Well, where do we go
for help? I mean how do we solve this problem? Well, we have got some
very painful things that we could do on our own, or we could ask the
International Monetary Fund to give us one of those subsidized loans at
4\1/2\ or 4.7 percent.''
And so what this does, Mr. Speaker, is to create a tremendous demand
in the world markets for subsidized loans subsidized by American
taxpayers' dollars for loans from the IMF, and that, we discovered, was
the reason, after a great deal of study, that the IMF needs more money.
Because of their policies they are expanding their role in the world
economy to the point where they have requested this 50 percent increase
in quota from the United States and, we believe, will be back, if they
are successful in obtaining this and expanding their economic
activities throughout the world, we believe that in just a few years
they will be back with another request for a like amount.
Now we asked the question of ourselves: Is this what we want to
believe is an appropriate use of these kinds or these numbers of
dollars from United States taxpayers, and that is a question that I
guess everyone can answer for themselves, but it seems to me that we
have some domestic needs, we had some discussions this morning about
our national security and how we are spending less today than we were
in 1985 in real dollars, and so there are many things that we want to
consider when we begin to look at whether or not we want to appropriate
this kind of money to provide for an expansion of an international loan
program being subsidized by American taxpayers dollars.
The third point that I would like to mention is the IMF practice of
imposing what we think are sometimes appropriate but oftentimes
inappropriate conditions that go along with the loans. And the way this
happens is that the IMF officials, oftentimes represented also by, I
might say, officials from the United States Treasury, in offering to
make loans negotiate certain types of conditions that go along with the
loans. For example, it may be thought that it would be a good idea to
change the way a country has its banking system structured, or at some
times the IMF officials might think it is a good idea to devalue
currency, or they may think it is a good idea to get out of a deficit
spending program that may be inherent in some country's practices by
increasing taxes. And those of you who have heard me talk many times
before know that those of us on the Joint Economic Committee, at least
on the Republican side and I think it is fair to say on both sides of
the aisle have questions about whether or not these conditions are
appropriate.
As a matter of fact, a few weeks ago I had the opportunity to visit
with some officials from the Korean government in Korea, and we talked
about these matters and the reforms that are underway as part of the
conditions of loans the International Monetary Funds have made in
Korea, and there were questions raised about whether or not they were
appropriate by me, and there was a great deal of talk about it, and
then, as I went out and left the meetings and rode out through the
commerce sections of Seoul there in South Korea, I noticed that there
were some signs on the shop windows, and of course they were written in
Korean and I could not tell what they said. But in the middle of the
signs, the three American letters IMF. IMF were there in the middle of
the signs.
{time} 1430
So I said to the gentleman who was with me, what do these signs say
in Korea that have the letters ``IMF'' in the middle? He said, well,
they say different things, but they are all very meaningful. They
essentially say that the IMF is here and that things are very bad, and
that the IMF is part of that because of the conditions that the IMF
apparently has imposed, and therefore, we are having a big sale because
nobody can afford to buy our goods at regular market prices, and so we
have cut-rate sales going on because the IMF is here. That is because,
Mr. Speaker, the conditions that are imposed by the IMF are often very
harmful and hurtful to the economy of the countries that the IMF is
proposing to try to help.
So what we might want to do if we are going to address the issues
involved here with the IMF, and I hope the Vice President may take note
of these things, is to have a thorough review of how the IMF arrives at
its decisions, not only about interest rates, but also about this point
focusing on conditions that accompany the loans.
Number 4, Mr. Speaker, we discovered during our studies of the
International Monetary Fund that it is, in fact, very difficult to
study the International Monetary Fund and how it works because they
work in a cloak of secrecy. We began last summer making requests for
information from the IMF, and it was not forthcoming. We asked again
and again and again for information and it was not forthcoming. We soon
learned that the IMF does, in fact, insist upon a level of secrecy that
prevents those of us who are here in Congress, representatives of the
American people, prevents us from doing an in-depth study of the IMF in
answering such questions as: what are the criteria that are used to
identify a country that needs help? What are the criteria that are used
to identify conditions that are imposed? What are the criteria that are
used for studying the effects of loans that are made by the IMF? And
questions as those are things that we, as responsible individuals who
are asked to vote for an $18 billion appropriations, ought to have
access to before we, as representatives of the American people, are
asked to vote on those issues.
So as to the issue of secrecy or transparency, we call upon them for
a more transparent system so that we can see into the system and see
what it is doing.
Now, I must say in fairness that partway through the process the
officials from the IMF said to my staff, tell Congressman Saxton to
come over, and if he promises to look at the documents, and if he
promises not to tell anybody what he sees, well, he is welcome to come.
Mr. Speaker, that is not the point. The point is that the American
people who provide these dollars, and economists and experts in
financial matters in this country, have as much right to see that
information as Members of Congress or as people who administer the IMF
itself. So this issue of transparency or secrecy is the fourth point
that I believe needs to be strongly addressed.
The fifth point is what I call exposure of taxpayers' dollars. Now,
there are those who advocate the $18 billion appropriation without
reforms; there are those who say that this really does not cost the
taxpayers a dime. I think that was the phrase that was used; it does
not cost the taxpayers in this country a dime, because in exchange for
the $18 billion, we get a promissory note. So the promissory note
becomes an asset in our portfolio, and in exchange, there is simply a
transfer of assets.
I have a hard time, I have a hard time with that because if we have
the $18 billion, we can apply it against our national debt; or if we
decide in this body that we need to spend it on national security, we
can spend it on national security; or if we decide that we want to
spend it on education or environmental protection, we can do that; or
if we decide we want a tax cut, we can apply it to the cost of a tax
cut. But I dare say that it would be somewhat difficult to take the
IMF's IOU or the promissory note that they signed for us and make the
same kinds of use of it so it may be considered an asset, but it is
certainly not a liquid asset; it is certainly not the same kind of
asset that we transfer to the IMF in exchange for the promissory note.
So I have a difficult time understanding the argument that it does
not cost the taxpayers a dime for that reason, and I also have a
difficult time understanding how it is that that great big bureaucracy
that is downtown here in Washington, D.C. known as the IMF with
thousands of square feet of office space and secretaries and
administrators and computers and all of those things that have to be
paid for that comes out of the IMF funds as well. So whether we accept
the argument that trading dollars for an IOU does not cost, if we
accept the fact that that does not cost the taxpayers a dollar,
[[Page H4876]]
which I do not, so there certainly is an expenditure and there
certainly is an exposure of taxpayer dollars.
Now, so far here today I have tried to be as explicit as possible
about the fact that the IMF already has $36 billion of our money and it
has asked for a 50 percent increase, because they want to expand their
activities, because they believe it is the right thing to do, and we
ought to question that and have an opportunity to study it and talk
about it.
Second, there is the issue that we call moral hazard; that is,
continuing to bail people out with subsidized interest rates, which is
not a very painful thing for them to do. As a matter of fact, I have
said this before, and I do not mean to trivialize this issue, but if
there were a bank across the street from the front of the Capitol that
had a sign on the front of it that said, come on over and we will
provide you with a 4.5 percent interest rate, I bet there would be a
long line in front of that building. So this issue of moral hazard and
subsidized interest rates encourages the wrong kind of behavior. It
encourages the kind of behavior that we are trying to quell or to stop
because of the incentive that is built into receiving low, cut-rate,
subsidized loans.
Also, the conditions that are imposed on countries, whether or not
they are helpful, perhaps sometimes they are hurtful. I believe that
sometimes they are, and I have gone into that. The issue of
transparency or secrecy is also I believe very important, and the issue
of the exposure of taxpayers' dollars is also important.
Let me conclude with point number 6 which I think is very important.
Secretary Rubin and other proponents, both in the United States
Treasury as well as in the IMF, and some people here in the House have
said, they need the money. Whether one agrees with everything the IMF
does or not, they perform a valuable function and therefore, they
really need the money.
I would just point out to my colleagues, Mr. Speaker, the IMF
currently has assets that include $40 billion in cash, $25 billion in a
program which gives them the authority to borrow $25 billion; they have
$30 billion in gold. Now, if I add all of this up, that looks like it
comes to $95 billion in assets already, and some are making the
argument that they need the money because of the need to go around the
world and expand programs.
So I guess I would just return to my initial point that the Vice
President brought this issue up yesterday, and it was reported in
today's newspapers that we who oppose flat out appropriating $18
billion without reforms are somehow isolationists, that is not true;
nothing could be further from the truth. If we can get the transparency
that we need, if we can study the process through which the officials
at the IMF proceed, if we can understand the necessity for the
conditions that we think are sometimes harmful; if we can do something
about this moral hazard issue so it does not encourage people to come
back to us time after time after time for bailout after bailout after
bailout, then perhaps those of us who call ourselves IMF reformers will
be willing to proceed with a new IMF appropriation of some kind.
So, Mr. Speaker, I have made the points here that are important to be
made. I am sorry that the Vice President has an inaccurate assessment
of our motivations. They are, in fact, honorable, and we, in fact, do
want the IMF to work, and we think that with some changes, it will
work, and this House ought to proceed to seriously consider those
changes or those reforms in conjunction with any appropriation that is
made for these purposes.
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