[Congressional Record Volume 144, Number 125 (Friday, September 18, 1998)]
[Senate]
[Pages S10583-S10585]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     THE IMPORTANCE OF IMF FUNDING

  Mr. BIDEN. Mr. President, I rise today to express my deep concern 
about our country's ability to lead at this crucial moment for the 
international economy.

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  Yesterday, the House of Representatives refused to provide the 
resources that the International Monetary Fund needs to deal with the 
most serious international financial crisis in years. What makes this 
failure even more inexcusable is that our participation in a stronger 
IMF would not cost American taxpayers a dime.
  As the President reminded us earlier this week, this is a time when 
we alone--with the most important economy in the world--are in a 
position to lead. And two days ago, Treasury Secretary Rubin and 
Federal Reserve Chairman Alan Greenspan told us just how dangerous the 
current situation really is.
  At this critical juncture, those who weaken our standing in key 
international financial institutions are playing a reckless game. By 
failing to provide the $14.5 billion U.S. ``quota'' increase--our share 
in an expanded capital reserve for the IMF--the House has increased the 
threat to our economy from the current international financial turmoil.
  This is just the kind of situation that can get out of control if no 
one steps in to steer a course through these troubled times. Right now, 
the Europeans are turned inward, concerned with the next stage in their 
economic integration--the introduction of a common currency that puts 
strict limits on its members' budget and interest rate policies.
  Japan remains in the grip of a political paralysis that has allowed 
its financial problems--centered in a banking system that is crumbling 
from the weight of bad loans--to fester for almost a decade.
  The Tigers of the Asian financial miracle have been declawed, and 
with their collapse the world has lost a major engine for growth.
  And our increasingly important trading partners in Latin America are 
catching their own version of the Asian flu. They face the threat of a 
chain of devaluations, budget crunches, and slower growth.
  Quite literally, Mr. President, we are in a world of hurt.
  The robust American economy of recent years--with strong job growth, 
rising incomes, healthy profits, high levels of investment in new 
technologies--has been the wonder and the envy of the rest of the 
world. And the fundamentals here, as Treasury Secretary Rubin and Fed 
Chairman Greenspan have stressed, remain strong.
  But in recent weeks, we have watched as wild swings in our stock 
market reveal profound anxiety and uncertainty about the effects of 
international events on our own country.
  Those international events have their ultimate origins in the 
particular circumstances of many different nations as they have entered 
today's global economy. But they have common threads--chief among them, 
a trend in those emerging economies toward excessive borrowing from 
other countries, debt denominated in dollars and other strong 
currencies. A lot of this international cash flowed into economies 
whose banking systems lacked fundamental rules for safety, soundness, 
and just plain honest bookkeeping.
  As those debt burdens reached unsustainable levels for many important 
emerging economies, investors were convinced that assets they held in 
the currencies of those countries were no longer as valuable, and that 
those countries were no longer in a position to prop up their 
currencies with shrinking reserves of hard currencies. Once that idea 
took hold, the flight from those currencies was as swift as it was 
inevitable.
  As the agonizing reappraisal of international lending grew to 
encompass other emerging economies, the currencies of countries as 
widely dispersed--and as different--as Russia, Venezuela, Brazil, and 
Argentina have come under increasing pressure. In the case of Russia, 
that pressure has resulted in the virtual collapse of the ruble and the 
evaporation of the nascent Russian stock market.
  What does this all have to do with us, Mr. President? A lot.
  First, as these emerging markets lose steam, they buy fewer finished 
goods from us and from other advanced economies, taking a bite out of 
our export sector, a major component of our recent growth. Facing 
shrinking markets and low-cost competition from the weakened emerging 
economies, American firms will no longer enjoy the kind of corporate 
earnings--or the kind of stock prices--that until just recently lifted 
Wall Street indexes into the stratosphere.
  Without those profits and those stock values, our companies will not 
be able to sustain the level of investment that has been a cornerstone 
of our recent booming economy. Ultimately, this must lead to lower job 
growth and thinner pay checks. And the decline in our stock market will 
affect many individual investors' willingness to continue the level of 
spending that has been the real backbone of our economy.
  Another key feature of this global slump is depressed prices for 
basic commodities like grain and oil. There is no need for me to remind 
my colleagues here that our farmers now face a serious crisis because 
of the loss of important export markets. I know I hear from my poultry 
farmers in Delaware, for whom Russia is a key export market, about 
their concerns.
  The latest numbers show that our trade deficit soared by more than 20 
percent in the second quarter of this year, and its gives every sign of 
getting worse before it gets better. Some projections show our exports 
declining in ways we haven't seen in more than a decade, while we 
continue to pull in cheap imports from the weakened economies around 
the world.
  We are in the middle of a major global economic transformation, Mr. 
President, and there is much we don't know about the workings of the 
evolving system of increased trade and increased international 
investment. But we can see from here that international financial 
problems--particularly foreign exchange crises--have a strong potential 
to spread, and that our economy, for all its fundamental strengths, 
will be hurt more the longer those problems persist.
  As we survey the wreckage from this global crisis, and consider the 
very real potential for deeper trouble, we cannot hesitate to use every 
tool at our disposal to restore confidence to financial markets. The 
International Monetary Fund is the institution that we created, along 
with the other major economies, at the end of World War II to inject a 
measure of stability into the management of international currency 
markets.
  Time and events have overtaken the problems for which the IMF was 
originally created. And while there are important and useful reforms of 
the IMF included in both House and Senate legislation this session, I 
am concerned that we are demanding too much of the IMF--expanding its 
responsibilities instead of focusing its energies where they can do the 
most good--and too little from such forums as the G-7 and others where 
the major economies of the world should be seeking a sense of common 
concern and a coordinated response.
  But that is a topic for another day, Mr. President.
  Today, we need look no farther than today's front page to see that 
the need for an international lender of last resort is essential to the 
stability of today's financial markets. Only such a lender can step in 
to keep a country from complete financial and political meltdown when 
private investment retreats. Only such a lender can work to limit the 
contagion of a currency collapse to more and more countries.
  But the vastly increased size of international financial markets now 
dwarfs the resources of the IMF relative to the problems it confronts.
  Last year, even before the meltdown in Asia, the IMF--with our 
agreement--concluded that the size and repercussions of foreign 
exchange crises in today's world justify an increase in the basic 
reserves of the IMF, the ``quota'' paid in by each of its 182 members. 
And we have also agreed, with the other senior members of the IMF, to 
make available a larger emergency fund, the New Arrangements to Borrow, 
for use when the quota funds get too low.
  Today, with the funds already committed to Asia and Russia, the IMF's 
resources are now dangerously low--so low that they call into question 
its ability to meet the next major run on an emerging economy's 
currency. So the rest of the world is looking to us to take the lead in 
providing those resources to the IMF. Our share of the quota increase 
would be $14.5 billion;

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our share of the New Arrangements to Borrow would be $3.5 billion.
  But while we must go through the appropriations process to make those 
funds available to the IMF, we get in return an interest bearing asset, 
so the overall budget effect is a wash. Let me repeat that--there is no 
budget outlay involved when we meet our commitment to increase the 
capacity of the IMF to meet international financial crises.
  And yet, Mr. President, we face the very real threat that the United 
States will simply flub this chance to maintain its leadership. With 
the failure of the House to act on the quota, providing only the $3.5 
billion for the New Arrangements to borrow, we leave the rest of the 
world to wonder about our commitment to deal with the very serious 
problems that afflict our global economy.
  Here in the Senate, we have been fortunate to have the benefit of 
real leadership on the issue of IMF funding. Senator Stevens has made 
use of two opportunities to put the Senate on record in support of full 
funding for our participation in the IMF. My colleagues on the Foreign 
Relations Committee, Senator Hagel and Senator Sarbanes, have lent 
their considerable energies and reputations to this effort.
  There are few opportunities left in this session for us to put this 
right, Mr. President. The Congress is already seen by the rest of the 
world as reluctant to take an easy--and, I repeat, costless--step to 
increase the resources of the one institution we have that is in a 
position to intervene in this crisis. This can only add to the 
uncertainty that is at the bottom of the current market unrest.
  Mr. President, there is every indication that we have a long, hard 
road between us and the end of the current financial turmoil. I hope 
that in the few weeks remaining to us this session we will take this 
one small step to start that journey.

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