[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

[[Page H4874]]

     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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