[House Report 105-454]
[From the U.S. Government Publishing Office]
105th Congress Report
2d Session HOUSE OF REPRESENTATIVES 105-454
_______________________________________________________________________
INTERNATIONAL MONETARY FUND REFORM AND AUTHORIZATION ACT OF 1998
_______
March 18, 1998.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Leach, from the Committee on Banking and Financial Services,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 3114]
[Including cost estimate of the Congressional Budget Office]
The Committee on Banking and Financial Services, to whom was
referred the bill (H.R. 3114) to authorize United States
participation in a quota increase and the New Arrangements to
Borrow of the International Monetary Fund, and for other
purposes, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``International Monetary Fund Reform and
Authorization Act of 1998''.
SEC. 2. FINDINGS.
The Congress finds that--
(1) the International Monetary Fund (IMF) was conceived at
Bretton Woods, New Hampshire, to promote a sound and open world
economy and a stable international financial system;
(2) while the international financial system has evolved
significantly since the IMF was founded fifty years ago, its
core mission remains focused on providing advice on
macroeconomic and exchange rate policy and highly conditional
financial assistance, including appropriate economic and
governance reforms, to countries facing balance of payments or
liquidity problems;
(3) the IMF includes elements in structural adjustment
programs that affect industrial and labor policies, which have
profound social and political ramifications;
(4) the IMF has intervened in financial markets in situations
of extreme uncertainty and crisis to restore investor and
lender confidence, which may result in partially relieving such
lenders and investors of the negative consequences of imprudent
lending and investment decisions;
(5) the expanded conditionality which accompanies IMF funding
has profound domestic consequences in the United States;
(6) the United States, as the leading power of the post-cold-
war world, has a greater interest than any other country in a
strengthened IMF that multilateralizes the financial support
for ongoing economic reforms in countries important to United
States interests and that can respond to threats to the
international financial system so that the United States does
not end up serving as the world's lender of last resort;
(7) the United States is the only country with veto power
over major IMF decisions;
(8) to sustain its capabilities, the IMF needs to sustain its
strength relative to a rapidly expanding global economy
characterized by exponential growth of global capital markets;
(9) the United States financial commitment to the IMF
leverages several times as much from other countries, and its
general resource financing is not scored as a budgetary outlay;
(10) the ongoing currency and banking crisis in the Far East
has affected United States financial markets and may result in
a decline in United States economic growth by as much as one
and one-half percent, and the United States has a vested
economic and national security interest in utilizing the IMF
and other multilateral mechanisms to help stabilize certain
Asian economies;
(11) neither the IMF nor the international financial system
predicted or was adequately prepared for the domestic financial
instability that has developed in East Asia, particularly the
excessive short-term borrowing the private sector institutions,
and therefore significant reforms of the IMF and the
international financial system are needed to ensure that the
world is better prepared to prevent and cope with similar
crises;
(12) the United States also has an interest in not
contributing to ``moral hazard'', the belief by private
investors and lenders that public credit will be used to bail
them out of the consequences of imprudent credit decisions;
(13) in establishing the terms for its financial support, the
IMF must strike a balance between contributing to the stability
of the Asian economies and ensuring that the private creditors
who contributed to the crisis by their imprudent lending also
make a significant contribution to the resolution of such
crisis; and
(14) with respect to some East Asian countries, some
observers believe that--
(A) the IMF has often imposed tight monetary and
fiscal policies designed for countries in other parts
of the world that follow excessively expansionary
fiscal and monetary policies, despite the fact that, by
the IMF's own account, the monetary and fiscal policies
of the East Asian countries have not contributed to the
financial difficulties faced by such countries;
(B) the rationale for such strategy has been the need
to attract foreign capital and provide the means to
earn foreign exchange;
(C) in the absence of solutions to the short term
debt overhang problem which requires a rollover of such
short term maturities by private creditors, and to the
unfettered flow of capital into and out of markets
without regard to maturities or purpose, as an integral
part of the IMF program, no interest rate is high
enough to attract such capital;
(D) a tight monetary and fiscal austerity program,
combined with industrial restructuring and labor market
flexibility measures where they are also a part of an
IMF program, may excessively depress the local economy,
creating potentially explosive social and political
problems;
(E) such a strategy could also create excessive
pressure to export and reduce imports, eroding support
in the United States for a more open international
trading and investment regime, as export markets
collapse and a flood of imports puts downward pressure
on U.S. wages and employment; and
(F) there is a consequent need for the IMF, other
international financial institutions, the United
States, and other countries, as appropriate, to fashion
programs and policies that are adapted to local
conditions and integrate private creditor
contributions.
TITLE I--INTERNATIONAL MONETARY FUND
SEC. 101. PARTICIPATION IN QUOTA INCREASE.
(a) In General.--The Bretton Woods Agreements Act (22 U.S.C. 286-
286mm) is amended by adding at the end the following:
``SEC. 61. QUOTA INCREASE.
``(a) In General.--The United States Governor of the Fund may consent
to an increase in the quota of the United States in the Fund equivalent
to 10,622,500,000 Special Drawing Rights.
``(b) Subject to Appropriations.--The authority provided by
subsection (a) shall be effective only to such extent or in such
amounts as are provided in advance in appropriations Acts.''.
(b) Effectiveness Subject to Certification.--The amendment made by
subsection (a) shall not take effect until the Secretary of the
Treasury certifies to the Committee on Banking and Financial Services
of the House of Representatives and the Committee on Foreign Relations
of the Senate that the investors and banks make a significant
contribution in conjunction with a financing package that, in the
context of an international financial crisis, might include taxpayer
supported official financing.
TITLE II--NEW ARRANGEMENTS TO BORROW
SEC. 201. NEW ARRANGEMENTS TO BORROW.
(a) In General.--Section 17 of the Bretton Woods Agreements Act (22
U.S.C. 286e-2 et seq.) is amended--
(1) in subsection (a)--
(A) by striking ``and February 24, 1983'' and
inserting ``February 24, 1983, and January 27, 1997'';
and
(B) by striking ``4,250,000,000'' and inserting
``6,712,000,000'';
(2) in subsection (b), by striking ``4,250,000,000'' and
inserting ``6,712,000,000''; and
(3) in subsection (d)--
(A) by inserting ``or the Decision of January 27,
1997,'' after ``February 24, 1983,''; and
(B) by inserting ``or the New Arrangements to Borrow,
as applicable'' before the period at the end.
(b) Effectiveness Subject to Certification.--The amendments made by
subsection (a) shall not take effect until the Secretary of the
Treasury certifies to the Committee on Banking and Financial Services
of the House of Representatives and the Committee on Foreign Relations
of the Senate that the investors and banks make a significant
contribution in conjunction with a financing package that, in the
context of an international financial crisis, might include taxpayer
supported official financing.
TITLE III--POLICY PROVISIONS
SEC. 301. ADVOCACY OF POLICIES TO ENHANCE THE GENERAL EFFECTIVENESS OF
THE INTERNATIONAL MONETARY FUND.
(a) In General.--Title XV of the International Financial Institutions
Act (22 U.S.C. 262o-262o-1) is amended by adding at the end the
following:
``SEC. 1503. ADVOCACY OF POLICIES TO ENHANCE THE GENERAL EFFECTIVENESS
OF THE INTERNATIONAL MONETARY FUND.
``(a) In General.--The Secretary of the Treasury shall instruct the
United States Executive Director of the International Monetary Fund to
use aggressively the voice and vote of the Executive Director to do the
following:
``(1) Vigorously promote policies to increase the
effectiveness of the International Monetary Fund in structuring
programs and assistance so as to promote policies and actions
that will contribute to exchange rate stability and avoid
competitive devaluations that will further destabilize the
international financial and trading systems.
``(2) Vigorously promote policies to increase the
effectiveness of the International Monetary Fund in promoting
market-oriented reform, trade liberalization, economic growth,
democratic governance, and social stability through--
``(A) appropriate liberalization of pricing, trade,
investment, and exchange rate regimes of countries to
open countries to the competitive forces of the global
economy;
``(B) opening domestic markets to fair and open
internal competition among domestic enterprises by
eliminating inappropriate favoritism for small or large
businesses, eliminating elite monopolies, creating and
effectively implementing anti-trust and anti-monopoly
laws to protect free competition, and establishing fair
and accessible legal procedures for dispute settlement
among domestic enterprises;
``(C) privatizing industry in a fair and equitable
manner that provides economic opportunities to a broad
spectrum of the population, eliminating government and
elite monopolies, closing loss-making enterprises, and
reducing government control over the factors of
production;
``(D) economic deregulation by eliminating
inefficient and overly burdensome regulations and
strengthening the legal framework supporting private
contract and intellectual property rights;
``(E) establishing or strengthening key elements of a
social safety net to cushion the effects on workers of
unemployment and dislocation; and
``(F) encouraging the opening of markets for
agricultural commodities and products by requiring
recipient countries to make efforts to reduce trade
barriers.
``(3) Vigorously promote policies to increase the
effectiveness of the International Monetary Fund, in concert
with appropriate international authorities and other
international financial institutions (as defined in section
1701(c)(2)), in strengthening financial systems in developing
countries, and encouraging the adoption of sound banking
principles and practices, including the development of laws and
regulations that will help to ensure that domestic financial
institutions meet strong standards regarding capital reserves,
regulatory oversight, and transparency.
``(4) Vigorously promote policies to increase the
effectiveness of the International Monetary Fund, in concert
with appropriate international authorities and other
international financial institutions (as defined in section
1701(c)(2)), in facilitating the development and implementation
of internationally acceptable domestic bankruptcy laws and
regulations in developing countries, including the provision of
technical assistance as appropriate.
``(5) Vigorously promote policies that aim at appropriate
burden-sharing by the private sector so that investors and
creditors bear more fully the consequences of their decisions,
and accordingly advocate policies which include--
``(A) strengthening crisis prevention and early
warning signals through improved and more effective
surveillance of the national economic policies and
financial market development of countries (including
monitoring of the structure and volume of capital flows
to identify problematic imbalances in the inflow of
short and medium term investment capital, potentially
destabilizing inflows of offshore lending and foreign
investment, or problems with the maturity profiles of
capital to provide warnings of imminent economic
instability), and fuller disclosure of such information
to market participants;
``(B) accelerating work on strengthening financial
systems in emerging market economies so as to reduce
the risk of financial crises;
``(C) consideration of provisions in debt contracts
that would foster dialogue and consultation between a
sovereign debtor and its private creditors, and among
those creditors;
``(D) consideration of extending the scope of the
International Monetary Fund's policy on lending to
members in arrears and of other policies so as to
foster the dialogue and consultation referred to in
subparagraph (C);
``(E) intensified consideration of mechanisms to
facilitate orderly workout mechanisms for countries
experiencing debt or liquidity crises;
``(F) consideration of establishing ad hoc or formal
linkages between the provision of official financing to
countries experiencing a financial crisis and the
willingness of market participants to meaningfully
participate in any stabilization effort led by the
International Monetary Fund;
``(G) using the International Monetary Fund to
facilitate discussions between debtors and private
creditors to help ensure that financial difficulties
are resolved without inappropriate resort to public
resources;
``(H) the International Monetary Fund accompanying
the provision of funding to countries experiencing a
financial crisis resulting from imprudent borrowing
with efforts to achieve a significant contribution by
the private creditors, investors, and banks which had
extended such credits; and
``(I) in the context of International Monetary Fund
responses to international financial crises, vigorously
promote consideration of appropriate ways in which
debtors and private creditors, in consultation with
central banks, can be encouraged voluntarily to take
steps to achieve resolution of outstanding debts, and
to do so in a manner that provides for an appropriate
degree of burden-sharing.
``(6) Vigorously promote policies that would make the
International Monetary Fund a more effective mechanism, in
concert with appropriate international authorities and other
international financial institutions (as defined in section
1701(c)(2)), for promoting good governance principles within
recipient countries by fostering structural reforms, including
procurement reform, that reduce opportunities for corruption
and bribery, and drug-related money laundering.
``(7) Vigorously promote the design of International Monetary
Fund programs and assistance so that governments that draw on
the International Monetary Fund channel public funds away from
unproductive purposes, including large `show case' projects and
excessive military spending, and toward investment in human and
physical capital as well as social programs to protect the
neediest and promote social equity.
``(8) Work with the International Monetary Fund to foster
economic prescriptions that are appropriate to the individual
economic circumstances of each recipient country, recognizing
that inappropriate stabilization programs may only serve to
further destabilize the economy and create unnecessary
economic, social, and political dislocation.
``(9) Structure International Monetary Fund programs and
assistance so that the maintenance and improvement of core
labor standards are routinely incorporated as an integral goal
in the policy dialogue with recipient countries, so that--
``(A) recipient governments commit to affording
workers the right to exercise internationally
recognized core worker rights, including the right of
free association and collective bargaining through
unions of their own choosing;
``(B) measures designed to facilitate labor market
flexibility are consistent with such core worker
rights;
``(C) the staff of the International Monetary Fund
adequately takes into account the views of the
International Labor Organization, particularly with
respect to the effect of labor market flexibility
measures on core worker rights in such countries; and
``(D) the staff of the International Monetary Fund
surveys the labor market policies and practices of
recipient countries and recommends policy initiatives
that will help to ensure the maintenance or improvement
of core labor standards.
``(10) Vigorously promote the adoption and enforcement of
laws promoting respect for internationally recognized worker
rights (as defined in section 507(4) of the Trade Act of 1974
(19 U.S.C. 2467(4))).
``(11) Vigorously promote International Monetary Fund
programs and assistance that are structured to the maximum
extent feasible to discourage practices which may promote
ethnic or social strife in a recipient country.
``(12) Vigorously promote recognition by the International
Monetary Fund that macroeconomic developments and policies can
affect and be affected by environmental conditions and
policies, including by working independently and with the
multilateral development banks to encourage countries to
correct market failures and pursue macroeconomic stability
while promoting policies for sustainable development and
environmental protection.
``(13) Facilitate greater International Monetary Fund
transparency, including by enhancing accessibility of the
International Monetary Fund and its staff, fostering a more
open release policy toward working papers, past evaluations,
and other International Monetary Fund documents, seeking to
publish all Letters of Intent to the International Monetary
Fund and Policy Framework Papers, and establishing a more open
release policy regarding Article IV consultations.
``(14) Facilitate greater International Monetary Fund
accountability and enhance International Monetary Fund self-
evaluation by vigorously promoting review of the effectiveness
of the Office of Internal Audit and Inspection and the
Executive Board's external evaluation pilot program and, if
necessary, the establishment of an operations evaluation
department modeled on the experience of the International Bank
for Reconstruction and Development, guided by such key
principles as usefulness, credibility, transparency, and
independence.
``(15) Vigorously promote coordination with the International
Bank for Reconstruction and Development and other international
financial institutions (as defined in section 1701(c)(2)) in
promoting structural reforms which facilitate the provision of
credit to small businesses, including microenterprise lending,
especially in the world's poorest, heavily indebted countries.
``(16) Vigorously promote, in the context of the
International Monetary Fund's policy dialogue with its member
countries, measures to protect the rights and land of
indigenous peoples, including the Penan of Borneo, Malaysia,
the Dayaks of East Kalimantan, Indonesia, and the indigenous
communities of Irian Jaya, Indonesia.
``(17) Vigorously promote policies such that the
International Monetary Fund, in considering loan programs and
assistance, takes into account the extent to which the
recipient government has demonstrated a commitment to--
``(A) providing accurate and complete data on the
annual expenditures and receipts of the armed forces;
``(B) establishing good and publicly accountable
governance, including an end to excessive military
involvement in the economy; and
``(C) making substantial reductions in excessive
military spending and forces, including domestic
security forces.
``(18) Structure International Monetary Fund debt relief
programs so that the programs do not impose unfair conditions
on heavily indebted poor countries, increase the amount of debt
relief available to poor countries, and decrease the time
required to qualify for debt relief.
``(b) Coordination With Other Executive Departments.--To the extent
that it would assist in achieving the goals described in subsection
(a), the Secretary of the Treasury shall pursue the goals in
coordination with the Secretary of State, the Secretary of Labor, the
Secretary of Commerce, the Administrator of the Environmental
Protection Agency, the Administrator of the Agency for International
Development, and the United States Trade Representative.''.
(b) Advisory Committee on IMF Policy.--Section 1701 of such Act (22
U.S.C. 262p-5) is amended by adding at the end the following:
``(e) Advisory Committee on IMF Policy.--
``(1) In general.--The Secretary of the Treasury shall
establish an International Monetary Fund Advisory Committee (in
this subsection referred to as the `Advisory Committee').
``(2) Membership.--The Advisory Committee shall consist of 8
members appointed by the Secretary of the Treasury, after
appropriate consultations with the relevant organizations, as
follows:
``(A) 2 members shall be representatives from
organized labor.
``(B) 2 members shall be representatives from banking
and financial services.
``(C) 2 members shall be representatives from
industry and agriculture.
``(D) 2 members shall be representatives from
nongovernmental environmental and human rights
organizations.
``(3) Duties.--Not less frequently than every 6 months, the
Advisory Committee shall meet with the Secretary of the
Treasury or the Deputy Secretary of the Treasury to review, and
provide advice on, the extent to which individual country
International Monetary Fund programs meet the policy goals set
forth in this Act regarding the International Monetary Fund.
``(4) Inapplicability of termination provision of the federal
advisory committee act.--Section 14(a)(2) of the Federal
Advisory Committee Act shall not apply to the Advisory
Committee.''.
SEC. 302. AVAILABILITY OF INTERNATIONAL MONETARY FUND LETTERS OF INTENT
REGARDING AGREEMENTS REQUIRED IN ORDER TO RECEIVE
ASSISTANCE.
Title XV of the International Financial Institutions Act (22 U.S.C.
262o-262o-1) is further amended by adding at the end the following:
``SEC. 1504. AVAILABILITY OF INTERNATIONAL MONETARY FUND LETTERS OF
INTENT REGARDING AGREEMENTS REQUIRED IN ORDER TO
RECEIVE ASSISTANCE.
``Within 3 business days after the United States Executive Director
at the International Monetary Fund receives a letter of intent from a
country regarding structural adjustment or an economic, social, or
other agreement required by the Fund in order to receive assistance
from the Fund, the Executive Director shall provide to the Secretary of
the Treasury a copy of the letter and any related memorandum of
understanding. Within 7 days after receiving the copy, the Secretary of
the Treasury shall make the copy available to the public (by electronic
or other readily and publicly accessible means) except to the extent
that the Secretary determines that doing so would--
``(1) endanger the national security of the country or of the
United States;
``(2) disrupt markets; or
``(3) be contrary to the obligations of the United States as
a member of the International Monetary Fund.''.
SEC. 303. ENFORCEMENT OF INDONESIAN COMPLIANCE WITH REFORMS REQUIRED BY
THE INTERNATIONAL MONETARY FUND.
The Secretary of the Treasury shall certify to the Committee on
Banking and Financial Services of the House of Representatives and the
Committee on Foreign Relations of the Senate that the United States
Executive Director at the International Monetary Fund will oppose
further disbursements of funds to Indonesia unless the Indonesian
government complies with the terms of its International Monetary Fund
reform package.
SEC. 304. SENSE OF THE CONGRESS ON THE TREATMENT OF MUCHTAR PAKPAHAN.
It is the sense of the Congress that the Government of Indonesia
should immediately release Muchtar Pakpahan from prison and have all
criminal charges against him dismissed.
SEC. 305. SENSE OF THE CONGRESS ON THE ROLE OF JAPAN IN RESTORING
REGIONAL AND GLOBAL ECONOMIC GROWTH.
(a) Finding.--The Congress finds that deteriorating economic
conditions and ongoing financial market turbulence in Asia makes it
more important than ever that Japan play a leadership role in helping
to restore confidence and serve as a crucial engine of regional and
world economic growth.
(b) Sense of the Congress.--It is the sense of the Congress that
Japan should assume a greater regional leadership role, which would
coincide with Japan's goal of promoting strong domestic demand-led
growth and avoiding a significant increase in its external surplus with
the United States and the countries of the Asia-Pacific region.
TITLE IV--REPORTS
SEC. 401. SEMIANNUAL REPORTS ON FINANCIAL STABILIZATION PROGRAMS LED BY
THE INTERNATIONAL MONETARY FUND IN CONNECTION WITH
FINANCING FROM THE EXCHANGE STABILIZATION FUND.
Title XVII of the International Financial Institutions Act (22 U.S.C.
262r-262r-2) is amended by adding at the end the following:
``SEC. 1704. REPORTS ON FINANCIAL STABILIZATION PROGRAMS LED BY THE
INTERNATIONAL MONETARY FUND IN CONNECTION WITH
FINANCING FROM THE EXCHANGE STABILIZATION FUND.
``(a) In General.--The Secretary of the Treasury, in consultation
with the Secretary of Commerce and other appropriate Federal agencies,
shall prepare reports on the implementation of financial stabilization
programs (and any material terms and conditions thereof) led by the
International Monetary Fund in countries in connection with which the
United States has made a commitment to provide, or has provided
financing from the stabilization fund established under section 5302 of
title 31, United States Code. The reports shall include the following:
``(1) A description of the condition of the economies of
countries requiring the financial stabilization programs,
including the monetary, fiscal, and exchange rate policies of
the countries.
``(2) A description of the degree to which the countries
requiring the financial stabilization programs have fully
implemented financial sector restructuring and reform measures
required by the International Monetary Fund, including--
``(A) ensuring full respect for the commercial
orientation of commercial bank lending;
``(B) ensuring that governments will not intervene in
bank management and lending decisions (except in regard
to prudential supervision);
``(C) the passage of appropriate financial reform
legislation;
``(D) strengthening the domestic financial system,
through financial sector restructuring, as well as
improved transparency and supervision; and
``(E) the opening of domestic capital markets.
``(3) A description of the degree to which the countries
requiring the financial stabilization programs have fully
implemented reforms required by the International Monetary Fund
that are directed at corporate governance and corporate
structure, including--
``(A) making nontransparent conglomerate practices
more transparent through the application of
internationally accepted accounting practices,
independent external audits, full disclosure, and
provision of consolidated statements; and
``(B) ensuring that no government subsidized support
or tax privileges will be provided to bail out
individual corporations, particularly in the
semiconductor, steel, and paper industries.
``(4) A description of the implementation of reform measures
required by the International Monetary Fund to deregulate and
privatize economic activity by ending domestic monopolies,
undertaking trade liberalization, and opening up restricted
areas of the economy to foreign investment and competition.
``(5) A detailed description of the trade policies of the
countries, including any unfair trade practices or adverse
effects of the trade policies on the United States.
``(6) A description of the extent to which the financial
stabilization programs have resulted in appropriate burden-
sharing among private sector creditors, including rescheduling
of outstanding loans by lengthening maturities, agreements on
debt reduction, and the extension of new credit.
``(7) A description of the extent to which the economic
adjustment policies of the International Monetary Fund and the
policies of the government of the country adequately balance
the need for financial stabilization, economic growth,
environmental protection, social stability, and equity for all
elements of the society.
``(8) Whether International Monetary Fund involvement in
labor market flexibility measures has had a negative effect on
core worker rights, particularly the rights of free association
and collective bargaining.
``(9) A description of any pattern of abuses of core worker
rights in recipient countries.
``(10) The amount, rate of interest, and disbursement and
repayment schedules of any funds disbursed from the
stabilization fund established under section 5302 of title 31,
United States Code, in the form of loans, credits, guarantees,
or swaps, in support of the financial stabilization programs.
``(11) The amount, rate of interest, and disbursement and
repayment schedules of any funds disbursed by the International
Monetary Fund to the countries in support of the financial
stabilization programs.
``(b) Timing.--Not later than October 1, 1998, and semiannually
thereafter, the Secretary of the Treasury shall submit to the
Committees on Banking and Financial Services and International
Relations of the House of Representatives and the Committees on Foreign
Relations, and Banking, Housing, and Urban Affairs of the Senate a
report on the matters described in subsection (a).''.
SEC. 402. REPORTS ON REFORMING THE ARCHITECTURE OF THE INTERNATIONAL
FINANCIAL SYSTEM.
(a) Findings.--The Congress finds that, in order to ensure that the
International Monetary Fund does not become the global lender of last
resort to private sector corporations and financial institutions, and
in order to help prevent future threats to the international financial
system, the Secretary of the Treasury and the Chairman of the Board of
Governors of the Federal Reserve System, working with their
counterparts in other countries and with international organizations as
appropriate, should--
(1) seek to establish a broad set of international
transparency principles on accounting and disclosure policies
and practices covering, in particular, private sector financial
organizations;
(2) promote improvements in the provision by both borrowers
and lenders of timely and comprehensive aggregate information
on cross-border financial stocks and flows;
(3) seek an international accord establishing uniform minimum
standards with respect to robust banking and supervisory
systems, which individual countries should be required to meet
as a condition for the establishment of subsidiaries, branches,
or other offices of banking institutions from their countries
in the jurisdictions of the countries participating in the
accord;
(4) immediately initiate with appropriate representatives of
the countries that are members of the International Monetary
Fund discussions aimed at securing national treatment for
United States investors in such countries; and
(5) seek to establish internationally acceptable bankruptcy
standards and should work particularly to have International
Monetary Fund recipient countries adopt such standards.
(b) Reports.--
(1) In general.--The Secretary of the Treasury shall prepare
3 reports on progress made toward achieving the objectives
outlined in subsection (a), which shall describe the steps
taken by the United States, other members of the world
community, and the international financial institutions to
strengthen safeguards in the global financial system, including
measures to promote more efficient functioning of global
markets, by--
(A) helping to develop effective legal and regulatory
frameworks, including appropriate bankruptcy and
foreclosure mechanisms;
(B) increasing transparency and disclosure by both
the private and public sectors;
(C) strengthening prudential standards, both globally
and in individual economies;
(D) improving domestic policy management;
(E) strengthening the role of the international
financial institutions in financial crisis prevention
and management; and
(F) ensuring appropriate burden sharing by the
private sector, particularly commercial banks and
financial institutions, in the resolution of crises.
(2) Timing.--The Secretary of the Treasury shall submit to
the Committees on Banking and Financial Services and
International Relations of the House of Representatives and the
Committees on Foreign Relations and Banking, Housing, and Urban
Affairs of the Senate 2 interim reports on the matters
described in paragraph (1), the first of which is due by
October 1, 1998, and the second of which is due on April 1,
1999, and a final report on such matters, which is due on
October 1, 1999.
SEC. 403. ANNUAL REPORT AND TESTIMONY ON THE STATE OF THE INTERNATIONAL
FINANCIAL SYSTEM, IMF REFORM, AND COMPLIANCE WITH
IMF AGREEMENTS.
Title XVII of the International Financial Institutions Act (22 U.S.C.
262r-262r-2) is further amended by adding at the end the following:
``SEC. 1705. ANNUAL REPORT AND TESTIMONY ON THE STATE OF THE
INTERNATIONAL FINANCIAL SYSTEM, IMF REFORM, AND
COMPLIANCE WITH IMF AGREEMENTS.
``(a) Reports.--Not later than October 1 of each year, the Secretary
of the Treasury shall submit to the Committee on Banking and Financial
Services of the House of Representatives and the Committee on Foreign
Relations of the Senate a written report on the progress (if any) made
by the United States Executive Director at the International Monetary
Fund in influencing the International Monetary Fund to adopt the
policies and reform its internal procedures in the manner described in
section 1503.
``(b) Testimony.--After submitting the report required by subsection
(a) but not later than October 31 of each year, the Secretary of the
Treasury shall appear before the Committee on Banking and Financial
Services of the House of Representatives and the Committee on Foreign
Relations of the Senate and present testimony on--
``(1) any progress made in reforming the International
Monetary Fund;
``(2) the status of efforts to reform the international
financial system; and
``(3) the compliance of countries which have received
assistance from the International Monetary Fund with agreements
made as a condition of receiving the assistance.''.
SEC. 404. AUDITS OF THE INTERNATIONAL MONETARY FUND.
Title XVII of the International Financial Institutions Act (22 U.S.C.
262r-262r-2) is further amended by adding at the end the following:
``SEC. 1706. AUDITS OF THE INTERNATIONAL MONETARY FUND.
``(a) Access to Materials.--Not later than 30 days after the date of
the enactment of this section, the Secretary of the Treasury shall
certify to the Committee on Banking and Financial Services of the House
of Representatives and the Committee on Foreign Relations of the Senate
that the Secretary has instructed the United States Executive Director
at the International Monetary Fund to facilitate timely access by the
General Accounting Office to information and documents of the
International Monetary Fund needed by the Office to perform financial
reviews of the International Monetary Fund that will facilitate the
conduct of United States policy with respect to the Fund.
``(b) Reports.--Not later than June 30, 1999, and annually
thereafter, the Comptroller General of the United States shall prepare
and submit to the committees specified in subsection (a) a report on
the financial operations of the Fund during the preceding year, which
shall include--
``(1) the current financial condition of the International
Monetary Fund;
``(2) the amount, rate of interest, disbursement schedule,
and repayment schedule for any loans that were initiated or
outstanding during the preceding calendar year, and with
respect to disbursement schedules, the report shall identify
and discuss in detail any conditions required to be fulfilled
by a borrower country before a disbursement is made;
``(3) a detailed description of whether the trade policies of
borrower countries permit free and open trade by the United
States and other foreign countries in the borrower countries;
``(4) a detailed description of the export policies of
borrower countries and whether the policies may result in
increased export of their products, goods, or services to the
United States which may have significant adverse effects on, or
result in unfair trade practices against or affecting United
States companies, farmers, or communities;
``(5) a detailed description of any conditions of
International Monetary Fund loans which have not been met by
borrower countries, including a discussion of the reasons why
such conditions were not met, and the actions taken by the
International Monetary Fund due to the borrower country's
noncompliance;
``(6) an identification of any borrower country and loan on
which any loan terms or conditions were renegotiated in the
preceding calendar year, including a discussion of the reasons
for the renegotiation and any new loan terms and conditions;
and
``(7) a specification of the total number of loans made by
the International Monetary Fund from its inception through the
end of the period covered by the report, the number and
percentage (by number) of such loans that are in default or
arrears, and the identity of the countries in default or
arrears, and the number of such loans that are outstanding as
of the end of period covered by the report and the aggregate
amount of the outstanding loans and the average yield (weighted
by loan principal) of the historical and outstanding loan
portfolios of the International Monetary Fund.''.
Explanation of the Legislation
H.R. 3114 as amended provides for the following: (1)
authorization for U.S. participation in an International
Monetary Fund (IMF) quota increase; (2) authorization for U.S.
participation in the New Arrangements to Borrow (NAB); (3) both
authorizations are subject to a certification by the Secretary
of the Treasury that investors and banks make a significant
contribution in conjunction with an IMF financing package; (4)
a requirement that the Secretary of the Treasury instruct the
U.S. Executive Director of the IMF to use aggressively his or
her voice and vote to vigorously promote certain policies to
enhance the general effectiveness of the IMF; (5) a requirement
that the Secretary of the Treasury pursue IMF reform policies
in coordination with other federal agencies; (6) an eight
member Advisory Committee on IMF Policy be established to meet
semi-annually with the Secretary or Deputy Secretary of the
Treasury; (7) a requirement that the Secretary of the Treasury
make public all letters of intent from borrowing countries to
the IMF with certain exceptions; (8) a requirement that the
Secretary of the Treasury certify that the U.S. Executive
Director of the IMF will oppose further disbursements of funds
to Indonesia unless that government complies with the terms of
its IMF financing; (9) a sense of Congress is expressed with
respect to both Muchtar Pakpahan, and the role of Japan in
restoring regional and global economic growth; (10) a
requirement that the Secretary of the Treasury report semi-
annually on the implementation of IMF financial stabilization
programs in connection with financing from the Exchange
Stabilization Fund; (11) a requirement that the Secretary of
the Treasury prepare three reports on reforming the
architecture of the international financial system; (12) a
requirement that the Secretary of the Treasury submit an annual
report on progress made by the U.S. Executive Director in
reforming the IMF and to testify annually before Congress
regarding international financial system reforms, IMF reform,
and compliance with IMF agreement; and (13) a certification by
the Secretary of the Treasury be given that the U.S. Executive
Director to the IMF has been instructed to facilitate timely
access by the General Accounting Office (GAO) to information
and documents of the IMF needed by the GAO to perform financial
audits of the IMF, and that no later than June 30, 1999 and
annually thereafter that the GAO prepare and submit a report to
Congress on the financial operations of the IMF.
Background and Need for Legislation
The bill as reported authorizes U.S. participation in an
International Monetary Fund (IMF) quota increase and the New
Arrangements to Borrow (NAB), subject to a certification by the
Secretary of the Treasury. It also requires the advocacy of
certain policies by the United States in the IMF, promotes
reform of the IMF and the international financial system, and
requires annual testimony as well as the production of several
reports by the Secretary of the Treasury.
The Committee on Banking and Financial Services strongly
supports continued U.S. participation and leadership in the
IMF, other international financial institutions and the global
economy. The Committee concurs with the assessment of Federal
Reserve Chairman Greenspan, that by ``joining with our major
trading partners and international financial institutions in
helping to stabilize the economies of Asia and promoting needed
structural changes, we are also encouraging the continued
expansion of world trade and global economic and financial
stability on which the ongoing increase in our own standard of
living depends. If we were to cede our role as a world leader,
or backslide into projectionist policies, we would threaten the
source of much of our own sustained economic growth.''
The need for continuing U.S. leadership in the
international financial system and the global economy has been
clearly demonstrated during the recent Asian financial crisis.
America's vital interests are clearly engaged in this region.
First, U.S. security is closely intertwined with the
maintenance of peace and stability in the Asia-Pacific, a
region where we have fought three wars in the last half-
century. Second, Asia's economic vitality is critical to our
own prosperity. Approximately one-third of U.S. exports go to
Asia, and in recent years the Asia-Pacific has accounted for
nearly half of U.S. export growth. Forty percent of U.S.
agricultural exports go to Asia. If this trend reverses, a loss
of American jobs and a slowdown in global growth could occur.
Indeed, some analysts already predict that Asia excluding China
will grow at less than 1% this year. As a result, economic
activity will slow in Latin America and U.S. net exports may
decline by as much as $70 billion or 1% of GDP. If the crisis
in Asia does not worsen, the U.S. economy may slow down by
between half a percent and one and half percent of GDP. Third,
there is a risk that economic and social instability in Asia
and other developing markets could threaten the model of
development that all Americans prefer--open, more democratic
societies coupled with open competitive economies. A failure of
the U.S. to lead would also create doubts in the region about
our long-term commitment to remain engaged in Asia.
The IMF has been central to efforts by the U.S. and other
countries to stabilize and contain the financial contagion in
Asia. As the world's largest economy and the greatest
beneficiary of the open international economic and financial
system, the U.S. has a major stake in the continued viability
of the IMF. It is in the U.S. national interest to support a
strengthened IMF that multilateralizes the financial support
for on-going economic reforms in countries that are important
to our interests and that can respond to widespread liquidity
problems.
The IMF is the principal monetary institution of the world
economy. Its membership of 182 countries is virtually
universal. Conceived in 1944 at Bretton Woods, New Hampshire,
the IMF is charged with promoting a sound and open world
economy and a stable international financial system. While the
world economy and international financial system have evolved
significantly since the IMF was founded 50 years ago, its core
mission has remained much the same: to provide advice on
macroeconomic and exchange rate policy and highly conditional
financial assistance to countries facing temporary balance of
payments problems. Its regular activities include oversight of
the operation of the international monetary system and members'
economic and financial policies. This oversight function
involves the Fund in regular consultations with members about
their economic and financial polices, and surveillance of
international financial market activity. The IMF also promotes
strong, market-oriented, macroeconomic reforms through
financing programs that lay the foundation for sustainable
economic growth and development.
To sustain its capabilities, particularly given the turmoil
in Asian and other developing markets, the IMF needs to sustain
its strength relative to a rapidly expanding global economy
characterized by exponential growth in international capital
markets. In a world of new and potentially serious financial
risks, the IMF needs sound financial footing. The U.S. also
needs to be prepared to participate financially in the
institution and contribute its share if our nation is to
influence the policy and operations of the institution
effectively and to institute needed reforms.
The role of the IMF should be stressed for three reasons.
First, it has the expertise to shape effective stabilization
and reform programs. Second, as an apolitical international
institution, it has the leverage to require a country to accept
conditions that no single government could require on its own.
Third, it maximizes burdensharing. Contributions from the U.S.
are matched on a better than five-to-one ratio, with Germany,
Japan and other countries providing the majority of resources
in support of goals supported by the United States. In
addition, under established statutory and budgetary treatment,
increases in the U.S. commitments to the general resources of
the IMF are not scored as budgetary outlays and do not come at
the expense of other programs in the budget.
In this context, the Administration has requested
Congressional support for both the New Arrangements to Borrow
(NAB), as a standby facility to preserve global stability in
the event of severe systemic threats and if quota resources are
insufficient, and a quota increase to provide the IMF adequate
resources to fund regular operations. These requests are
explained more fully below.
For the FY 1998 supplemental budget, the Administration has
requested authorization for U.S. participation in the New
Arrangements to Borrow (NAB) and to provide the dollar
equivalent of Special Drawing Rights (SDR), approximately $3.4
billion, for this purpose. The NAB is a set of emergency credit
lines for the IMF to supplement its ordinary (quota) resources
if necessary to deal with a threat to the international
monetary system. The Administration's FY 1998 supplemental
requests an appropriation for budget authority in addition to
the SDR ($6 billion) previously authorized and appropriated for
the General Arrangements to Borrow (GAB), first established in
1962.
The Committee believes that the growth of international
capital flows relatives to the size of the IMF makes U.S.
participation in the NAB in our national interest. Recent
events have demonstrated that existing credit line arrangements
under the GAB are not a sufficiently large ``reserve tank'' to
supplement the regular resources of the IMF. For example, the
total financial package provided to Mexico during the peso
crisis was larger than the GAB, whereas the NAB would total
roughly $46 billion at current exchange rates--roughly the size
of the Mexican assistance plan and more than 2\1/2\ times the
IMF's contribution to it. Operationally, the NAB incorporates
three levels of protection to mitigate against moral hazard
risk: it can only be used in exceptional circumstances;
activation requires agreement by participants representing 80%
of credit arrangements (the U.S. holds a near-veto by virtue of
its share of just under 20%); and strong conditionality is
applied when it is activated to finance IMF lending. NAB
participants have a claim on the IMF, not on the country which
the IMF is financing. The NAB lenders received interest on the
amount of their claim, which is denominated in SDR. Interest is
paid in SDRs, at the prevailing SDR interest rate, which is
calculated on the basis of the prevailing short-term interest
rates of the SDR's five component currencies.
In its FY 1998 supplemental budget request, the
Administration has also requested authorization for a 45%
increase in the ordinary (quota) resources of the IMF, and to
provide the dollar equivalent of 10,622.5 billion SDRs
(approximately $14.5 billion). The rapid evolution of the
global financial system and the growth in capital flows to
rapidly growing emerging markets has helped facilitate
international trade in goods and services and has helped raise
standards of living worldwide. But it has also increased the
risks that financial instability in one country can quickly be
transmitted to others and magnified the potential size of
financing gaps when emergencies arise. When there is a need to
defend the international financial system, the IMF is uniquely
placed to mobilize substantial assistance quickly and, when
justified, to provide the largest share of official financing.
According to the Treasury Department, the IMF does not have
sufficient funds to deal with a deepening of the Asian crisis
or its spread to other developing markets. As a result of its
Asian commitments, the IMF's ordinary financial resources are
approaching a historically low level. At present, the IMF has
about $45 billion in uncommitted resources, but only $10-15
billion is available because an estimated $30-35 billion must
be held in reserve to accommodate potential withdrawals by
members. In addition, the IMF has access to roughly $23 billion
in the GAB, for a total of $33-38 billion of total lending
capacity. By comparison, in the last six months alone the IMF's
commitment to financial stabilization in Asia amounted to some
$35 billion.
It is important to note the distinction between the quota
increase and the NAB. The IMF's quota resources serve a
different purpose than the contingent lines of credit that form
the NAB. Quota resources form the basis for the IMF's normal
operations. The IMF must have assurance that it can rely on
their availability in order to meet projected demand for its
lending programs and any request from a creditor country to
encash it claim on the institution. The NAB/GAB are intended to
provide supplementary resources if the IMF is faced with an
extraordinary request for assistance but lacks an adequate
supply of quota resources. It is neither intended nor desirable
that the GAB/NAB should be used to help finance normal IMF
programs.
The Executive Branch and the Congress have, since 1968,
agreed that transactions with the IMF related to U.S. credit
line arrangements or the U.S. quota subscription are treated as
exchanges of monetary assets that are not scored as outlays
and, therefore, do not increase the deficit. When the U.S.
provides resources to the IMF, it receives a liquid interest-
bearing claim on the IMF which is backed by its substantial
reserves, including gold. The U.S. claim is like a deposit in
the soundest of financial institutions, on which the U.S. is
paid interest and which it can withdraw on very short notice if
needed. Since 1980, authorization and appropriations have been
required when the U.S. advances funds to the IMF under quota
commitments or credit line arrangements, but the ``no outlay''
treatment has remained in place. Over time, these claims do
give rise to valuation adjustments. Under the five-year
bipartisan budget agreement reached in 1997, an adjustment to
the discretionary spending limits is assumed to accommodate
exchanges of monetary assets and international organization
arrears.
The Committee believes there is some confusion about rate
interest charged on IMF loans under standby or similar credit
facilities. Under current procedures in use at the Fund, the
basic rate of charge (interest plus additional costs)
applicable to members' use of the Fund's ordinary resources is
determined at the beginning of each financial year. The rate of
charge has been set as a proportion of the weekly SDR interest
rate, and change weekly. The SDR interest rate is calculated as
the weighted average of short-term interest rates in the U.S.,
Germany, France, Japan, and the U.K. (with the 3-month Japanese
Government Bond yielding an historic low of 1.40%). The current
SDR interest rate is roughly 4.73%. Because of this averaging
methodology, the cost of IMF financing is below the rates at
which most borrowers can obtain from the market. These rates of
interest may not be appropriate in all circumstances,
particularly when extraordinary IMF financing is called for.
Here the Committee would note that the U.S. has
successfully pushed for a radical change in IMF procedures so
that interest rates on high levels of financing have been
raised and includes an explicit risk premium. The Supplemental
Reserve Facility (SRF), first used in Korea after its
endorsement in Manila by Asian finance officials and APEC
leaders in late 1997, combines not only market rates of
interest--but premium rates some 300 basis points above the
Fund's normal cost of financing--with shorter maturities.
Modeled on America's use of the ESF during the Mexican peso
crisis, the new facility maximizes the incentive for a quick
return by governments to reliance on private market financing.
It will be available only in limited circumstances and only in
association with a strong policy response by the borrowing
government needed to restore confidence.
Hearings
On November 13, 1997, the Committee on Banking and
Financial Services held a hearing on financial instability in
Asia. Witnesses were as follows: Alan Greenspan, Chairman of
the Board of Governors of the Federal Reserve System; Lawrence
H. Summers, Deputy Secretary of the Treasury; John Lipsky,
Chief Economist and Director of Research, Chase Manhattan Bank;
Robert D. Hormats, Vice Chairman, Goldman Sachs
(International); C. Fred Bergsten, Director, Institute for
International Economics; David Hale, Chief Global Economist,
Zurich Kemper Investments; and Jerome Levinson, Professor,
American University College of Law.
On January 27, 1998, Chairman Leach (for himself, Mr.
LaFalce, Mrs. Roukema, Mr. Vento, Mr. Hinchey, and Mr. Jackson)
introduced H.R. 3114, the International Monetary Fund Reform
and Authorization Act of 1998.
On January 30, 1998, the Committee on Banking and Financial
Services held a hearing on financial instability in Asia and
the role of the International Monetary Fund. Witnesses were as
follows: Robert E. Rubin, Secretary of the Treasury; Wiilliam
S. Cohen, Secretary of Defense; Alan Greenspan, Chairman of the
Board of Governors of the Federal Reserve System; Lawrence H.
Summers, Deputy Secretary of the Treassury; Paul Wolfowitz,
Dean, Paul H. Ntize School of Advanced International Studies,
Johns Hopkins, University; Lawrence Lindesy, Resident Scholar,
American Enterprise Institute; Lawrence Chimerine, Senior Vice
President and Chief Economist, Economic Strategy Institute;
Steven Hanke, Professor of Applied Economics, The Johns Hopkins
University; Robert Zoellick, Professor of National Security,
United States Naval Academy; and C. Fred Bergsten, Director,
Institute for International Economics.
On February 3, 1998, the Committee on Banking and Financial
Services held its third hearing on financial instability in
Asia and the role of the International Monetary Fund. Witnesses
were as follows: the Hon. Peter J. Visclosky; the Hon. Cliff
Stearns; the Hon. Michael D. Crapo; the Hon. Ron Paul; the Hon.
Bernard Sanders; Raymond Bracy, President, Boeing China, the
Boeing Company; George Becker, International President, United
Steelworkers of America, AFL-CIO; Steve Appleton, Chairman,
CEO, and President, Micron Technology, Inc.; Dean Kleckner,
President, American Farm Bureau Federation; Joseph Russo,
President, IPSCO Steel, Inc.; Henson Moore, President and CEO,
American Forest & Paper Association; John D. Cohn, Vice
President of Global Strategy Development, Rockwell Collins; and
Don Hilger, Assistant Vice President, Grain Division, Cargill,
Inc., on behalf of the North American Export Grain Association.
Committee Consideration and Votes
On Thursday, March 5, 1998, the Committee on Banking and
Financial Services met in open markup session and ordered H.R.
3114 reported to the full House for consideration, as amended,
by a roll call vote of 40 to 9.
The Committee adopted the following 21 amendments by voice
vote.
The Managers' Amendment offered by Mr. Leach and Mr.
LaFalce further amended the findings and instructions to the
Secretary of the Treasury under Title III--Policy Provisions,
and added a new Title IV requiring semi-annual reports by the
Secretary of the Treasury regarding implementation of IMF
stabilization programs.
An amendment to the Managers' amendment by Mr. Bereuter to
add the words ``internationally acceptable'' to the description
of domestic bankruptcy laws was adopted by unanimous consent.
An amendment to the Managers' amendment by Mrs. Roukema
adding several provisions to the reporting requirements
contained in Title IV was adopted by unanimous consent.
An amendment to the Managers' amendment by Mr. Hinchey
changing from passive to active wording language instructing
the U.S. Executive Director of the IMF to seek to prevent
social strife in borrowing countries was adopted by unanimous
consent.
An amendment to the Managers' amendment by Mr. Hinchey
changing from passive to active wording language instructing
the U.S. Executive Director of the IMF to seek to promote
sustainable development and environmental protection was
adopted by unanimous consent.
An amendment offered by Mr. Castle to provide for reform of
the architecture of the international financial system by
requiring 3 reports outlining progress being made toward
achieving establishing a set of international transparency
principles and practices, promoting improvements by borrowers
and lenders of timely and comprehensive aggregate information
on cross-border financial stocks and flows, and seeking to
establish an international accord establishing uniform minimum
standards with respect to banking and supervisory systems. Also
the amendment requires the Secretary of the Treasury to appear
before Congress annually to report on the state of the
international financial system, the progress being made in
achieving policy goals, and the extent to which countries
comply with the conditions of IMF assistance.
Two amendments considered En Bloc offered by Mr. Bereuter
to the Castle amendment. These amendments added provisions to
secure national treatment for U.S. investors and establish
internationally acceptable bankruptcy standards as negotiating
objectives for the Department of the Treasury and the Federal
Reserve.
A substitute amendment by Mr. Leach to an amendment offered
by Mr. Sanders. The substitute expresses the sense of Congress
that the Government of Indonesia should immediately release
Muchtar Pakpahan from prison and have all criminal charges
against him dismissed.
An amendment by Ms. Waters providing that the Secretary of
the Treasury shall certify to the House Banking and Senate
Foreign Relations Committees that the U.S. Executive Director
of the IMF will oppose further disbursements of funds to
Indonesia unless the Indonesian government complies with the
terms of its IMF reform package.
An amendment offered by Mr. Vento and Mr. Bentsen requiring
the Secretary of the Treasury to publicly disclose letters of
intent and memoranda of understanding reached between the IMF
and recipient countries within 10 days of the agreement,
subject to three exceptions.
An amendment offered by Mr. Lucas and Mr. Sandlin, adding a
provision requiring the Secretary of the Treasury to instruct
the U.S. Executive Director of the IMF to encourage the opening
of markets for agricultural commodities and products. This
amendment was modified by Mr. Lucas' unanimous consent request
to insert the word ``commodities.''
An amendment offered by Mr. Kennedy requiring the Secretary
of the Treasury to instruct the U.S. Executive Director of the
IMF to structure IMF programs to as to protect the rights and
land of indigenous people.
An amendment offered by Mr. Kennedy requiring the Secretary
of the Treasury to instruct the U.S. Executive Director of the
IMF to promote policies at the IMF regarding the consideration
by the IMF of the budgetary transparency, degree of good
governance, and military expenditures of borrowing countries.
An amendment offered by Ms. Waters requiring the Secretary
of the Treasury to instruct the U.S. Executive Director of the
IMF to structure IMF debt relief programs so that they do not
impose unfair conditions on heavily indebted poor countries,
increase the amount of debt relief available to poor countries,
and decrease the time required to qualify for debt relief.
An amendment offered by Mrs. Roukema adding the words ``and
other appropriate federal agencies'' to reporting requirements
in Title IV.
An amendment offered by Mr. Kennedy requiring the Secretary
of the Treasury to instruct U.S. Executive Director of the IMF
to promote consideration of appropriate ways in which debtors
and private creditors, in consultation with central banks, can
be encouraged voluntarily to provide for an appropriate degree
of burden sharing.
A substitute amendment offered by Mr. Leach an amendment
offered by Mr. Hinchey to express the sense of Congress that
Japan should promote domestic-demand led growth and avoid a
significant increase in its external surplus with the U.S. and
countries of the Asia-Pacific region.
An amendment offered by Mr. Sanders withholding
authorization of U.S. contributions to the NAB and the IMF
quota increase until the Secretary of Treasury certifies that
the investors and banks make a significant contribution in
conjunction with a financial package that, in the context of an
international financial crisis, might include taxpayer
supported official financing. (After the Sanders motion to
reconsider was agreed to, the amendment was adopted as a
substitute for the Sanders/Bachus amendment which passed. See
the roll call votes below.)
An amendment offered by Mrs. Kelly requiring that not later
than 30 days after passage of this Act, the Secretary of the
Treasury shall certify that the U.S. Executive Director of the
IMF has been directed to facilitate timely access by GAO to
information it needs to perform financial reviews of the IMF
and further requires an annual report to Congress on the
financial operations of the IMF.
An amendment by Mr. Bentsen adding to the reporting
requirements included in Title IV.
An amendment offered by Mr. Hinchey requiring the Secretary
of the Treasury to instruct the U.S. Executive Director to use
the voice and vote to vigorously promote the adoption and
enforcement of laws promoting respect for internationally
recognized workers rights.
Rollcall Votes
Clause 2(l)(2)(B) of rule XI of the Rules of the House
requires the Committee to list the recorded vote on the motion
to report legislation and amendments thereto. The following are
the recorded votes on the motion to report H.R. 3114 and on
amendment offered to the measure, including the names of those
Members voting for and against.
An amendment offered by Mr. Sanders and Mr. Bachus to
withhold authorization of U.S. contributions to the NAB and the
IMF quota increase from taking effect until the Secretary of
the Treasury certifies that the IMF has amended its bylaws to
require funds to any country unless private creditors,
investors and banks which have extended credit make significant
prior contribution by debt relief, rollovers and the provision
of new credit, was approved by a vote of 19-15. (This provision
was later amended by an amendment offered by Mr. Sanders after
his motion to reconsider the prior amendment was agreed to.)
YEAS NAYS
Mr. Lazio Mr. Leach
Mr. Bachus Mrs. Roukema
Mr. Campbell Mr. Castle
Mr. Royce Mrs. Kelly
Mr. Lucas Mr. Cook
Mr. Ehrlich Mr. LaFalce
Mr. Barr Mr. Frank
Dr. Paul Mr. Kanjorski
Dr. Weldon Ms. Roybal-Allard
Mr. Jones Mr. Bentsen
Mr. Fossella Mr. Maloney
Mr. Kennedy Ms. Hooley
Ms. Waters Mr. Weygand
Mr. Sanders Mr. Sandlin
Mr. Barrett, T. Mr. Meeks, G.
Mr. Watt
Mr. Hinchey
Mr. Jackson, Jr.
Mr. Sherman
The following six amendments were defeated by rollcall
vote. First, an amendment offered by Mr. Sanders which required
that the effective dates for new funding in the bill not take
effect until the Treasury Secretary certifies that the IMF, in
consultation with the International Labor Organization, has put
in place an enforceable plan for the EU and Japan to absorb a
reasonable share of the increased imports from South Korea,
Indonesia, and Thailand resulting from compliance with the
overall program approved by the IMF for resolution of the
crisis. The amendment was defeated 5-32.
YEAS NAYS
Mr. Metcalf Mr. Leach
Mr. Ney Mr. McCollum
Dr. Paul Mr. Bereuter
Mr. Jones Mr. Baker, R.
Mr. Sanders Mr. Bachus
Mr. Castle
Mr. Campbell
Mr. Lucas
Mr. Ehrlich
Mr. Fox
Mrs. Kelly
Mr. Ryun
Mr. Snowbarger
Mr. Riley
Mr. LaTourette
Mr. LaFalce
Mr. Vento
Mr. Frank
Mr. Kanjorski
Mr. Kennedy
Ms. Waters
Ms. Roybal-Allard
Mr. Barrett, T.
Ms. Velazquez
Mr. Watt
Mr. Hinchey
Mr. Bentsen
Mr. Jackson, Jr.
Mr. Maloney
Mr. Sherman
Mr. Sandlin
Mr. Meeks, G.
Second, an amendment offered by Mr. Sanders to withhold
authorization of U.S. contributions to the NAB and IMF quota
increase from taking effect until the Secretary of the Treasury
certifies that the IMF has amended its bylaws to prohibit the
IMF from providing assistance to any country which has not
adopted and is enforcing laws promoting respect for
internationally-recognized worker rights as defined in the
Trade Act of 1974, as amended. This amendment was defeated 15-
23.
YEAS NAYS
Mr. Ney Mr. Leach
Dr. Paul Mrs. Roukema
Mr. Kennedy Mr. Bachus
Ms. Waters Mr. Castle
Mr. Sanders Mr. Royce
Mr. Gutierrez Mr. Lucas
Ms. Roybal-Allard Mr. Ehrlich
Mr. Barrett, T. Mr. Barr
Mr. Watt Mr. Fox
Mr. Hinchey Mrs. Kelly
Mr. Jackson, Jr. Dr. Weldon
Mr. Maloney Mr. Ryun
Mr. Weygand Mr. Cook
Mr. Torres Mr. Snowbarger
Mr. Meeks, G. Mr. Riley
Mr. Fossella
Mr. LaFalce
Mr. Vento
Mr. Frank
Mrs. Maloney
Mr. Bentsen
Ms. Hooley
Mr. Sandlin
Third, an amendment offered by Mr. Bachus to instruct the
U.S. Executive Director of the IMF to oppose provision of loans
to countries which hinder the free exercise of religion. This
amendment was defeated 8-30.
YEAS NAYS
Mr. Bachus Mr. Leach
Mr. Lucas Mrs. Roukema
Mr. Metcalf Mr. Bereuter
Dr. Paul Mr. Lazio
Mr. Ryun Mr. King
Mr. Cook Mr. Campbell
Mr. Riley Mr. Royce
Mr. Jones Mr. Ehrlich
Mr. Barr
Mrs. Kelly
Mr. LaTourette
Mr. Fossella
Mr. LaFalce
Mr. Vento
Mr. Frank
Mr. Kanjorski
Mr. Kennedy
Ms. Waters
Mr. Sanders
Mrs. Maloney
Ms. Roybal-Allard
Mr. Barrett, T.
Mr. Watt
Mr. Bentsen
Mr. Maloney
Ms. Hooley
Mr. Weygand
Mr. Sherman
Mr. Sandlin
Mr. Meeks, G.
Fourth, an amendment offered by Mr. McCollum that would
condition the quota increase on whether a law is enacted that
would bar the use of any funds from the Exchange Stabilization
Fund without Congressional authorization. This amendment was
defeated 9-32.
YEAS NAYS
Mr. McCollum Mr. Leach
Mr. Bachus Mrs. Roukema
Mr. Campbell Mr. Bereuter
Mr. Royce Mr. Baker, R.
Mr. Metcalf Mr. Lazio
Mr. Ryun Mr. Castle
Mr. Jones Mr. King
Mr. Fossella Mr. Ehrlich
Mr. Sanders Mrs. Kelly
Mr. Cook
Mr. LaTourette
Mr. Manzullo
Mr. LaFalce
Mr. Vento
Mr. Frank
Mr. Kanjorski
Mr. Kennedy
Ms. Waters
Mrs. Maloney
Ms. Roybal-Allard
Mr. Barret, T.
Ms. Velazquez
Mr. Watt
Mr. Hinchey
Mr. Bentsen
Mr. Jackson, Jr.
Mr. Maloney
Ms. Hooley
Ms. Carson
Mr. Weygand
Mr. Sherman
Mr. Sandlin
Fifth, an amendment offered by Mr. McCollum requiring the
Secretary of the Treasury to instruct the U.S. Executive
Director of the IMF to oppose loans from the IMF to any country
in an amount that exceeds the equivalent of the lesser of $10
billion; or the greater of an amount equal to 150% of the
Special Drawing Rights of the country or $5 billion, unless
Congress has approved such loans by joint resolution. The
amendment was defeated 9-35.
YEAS NAYS
Mr. McCollum Mr. Leach
Mr. Bachus Mrs. Roukema
Mr. Metcalf Mr. Bereuter
Mr. Barr Mr. Lazio
Mr. Ryun Mr. Castle
Mr. Hill Mr. King
Mr. Sessions Mr. Campbell
Mr. Jones Mr. Royce
Mr. Fossella Mr. Lucas
Mr. Ehrlich
Mr. Cook
Mr. LaTourette
Mr. Manzullo
Mr. LaFalce
Mr. Vento
Mr. Frank
Mr. Kanjorski
Mr. Kennedy
Ms. Waters
Mr. Sanders
Mrs. Maloney
Ms. Roybal-Allard
Mr. Barrett
Ms. Velazquez
Mr. Watt
Mr. Hinchey
Mr. Bentsen
Mr. Jackson, Jr.
Mr. Maloney
Ms. Hooley
Ms. Carson
Mr. Weygand
Mr. Sherman
Mr. Sandlin
Mr. Meeks, G.
Sixth, an amendment offered by Mr. McCollum to require the
Secretary of the Treasury to withdraw the U.S. from the IMF
within 3 years of the date of enactment; submit reports on new
mechanisms for addressing international monetary issues; and
further requires the repeal of the Bretton Woods Agreement Act
3 years after the date of enactment. This amendment was
defeated 12-36.
YEAS NAYS
Mr. McCollum Mr. Leach
Mr. Bachus Mrs. Roukema
Mr. Campbell Mr. Bereuter
Mr. Royce Mr. Lazio
Mr. Ney Mr. Castle
Mr. Barr Mr. King
Mr. Ryun Mr. Lucas
Mr. Riley Mr. Ehrlich
Mr. Hill Mrs. Kelly
Mr. Sessions Mr. Cook
Mr. Jones Mr. LaTourette
Mr. Sanders Mr. Manzullo
Mr. Fossella
Mr. LaFalce
Mr. Vento
Mr. Frank
Mr. Kanjorski
Mr. Kennedy
Ms. Waters
Mrs. Maloney
Ms. Roybal-Allard
Mr. Barrett, T.
Ms. Velazquez
Mr. Watt
Mr. Hinchey
Mr. Ackerman
Mr. Bentsen
Mr. Jackson, Jr.
Mr. Maloney
Ms. Hooley
Ms. Carson
Mr. Weygand
Mr. Sherman
Mr. Torres
Mr. Sandlin
Mr. Meeks, G.
A motion to adopt H.R. 3114, as amended, for final passage
and favorably report it to the full House was approved by a
vote of 40-9.
YEAS NAYS
Mr. Leach Mr. McCollum
Mrs. Roukema Mr. Bachus
Mr. Bereuter Mr. Campbell
Mr. Lazio Mr. Royce
Mr. Castle Mr. Barr
Mr. King Mr. Riley
Mr. Lucas Mr. Hill
Mr Metcalf Mr. Jones
Mr. Ney Mr. Sanders
Mr. Ehrlich
Mrs. Kelly
Mr. Ryun
Mr. Cook
Mr. Sessions
Mr. LaTourette
Mr. Manzullo
Mr. Fossella
Mr. LaFalce
Mr. Vento
Mr. Frank
Mr. Kanjorski
Mr. Kennedy
Ms. Waters
Mrs. Maloney
Ms. Roybal-Allard
Mr. Barrett, T.
Ms. Velazquez
Mr. Watt
Mr. Hinchey
Mr. Ackerman
Mr. Bentsen
Mr. Jackson, Jr.
Mr. Maloney
Ms. Hooley
Ms. Carson
Mr. Weygand
Mr. Sherman
Mr. Torres
Mr. Sandlin
Mr. Meeks, G.
Committee Oversight Findings
Pursuant to clause 2(l)(3)(A) of rule XI of the Rules of
the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform and Oversight Findings
Pursuant to clause 2(l)(3)(D) of rule XI of the Rules of
the House of Representatives, no oversight findings have been
submitted to the Committee by the Committee on Government
Reform and Oversight.
Constitutional Authority
In compliance with clause 2(l)(4) of rule XI of the Rules
of the House of Representatives, the Constitutional Authority
for Congress to enact this legislation is derived from Article
I, section 8, clause 1 (relating to the general welfare of the
United States); Article I, section 8, clause 3 (relating to
Congressional power to regulate commerce); Article 1, section
8, clause 5 (relating to the power ``to coin money'' and
``regulate the value thereof''; and Article I, section 8,
clause 18 (relating to making all laws necessary and proper for
carrying into execution powers vested by the Constitution in
the government of the United States).
New Budget Authority and Tax Expenditures
Clause 2(l)(3)(B) of rule XI of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Advisory Committee Statement
An advisory committee within the meaning of Section 5(b) of
the Federal Advisory Committee Act was created to advise the
Treasury Department on its policy toward the IMF. The Federal
Advisory Committee Act (FACA) was instituted because Congress
found that there were numerous committees and similar groups
established to advise officers and agencies and there was a
need to set the standards and uniform procedures on how they
functioned and for how long. Because H.R. 3114 provides for an
advisory committee on IMF policy representative of business,
labor, nongovernmental environmental and human rights
organizations, agriculture and financial services, and the
provisions of the FACA apply. In order to override the
termination provision of 2 years under sec. 14(a)(1) of the
FACA for this advisory committee, Congress expressly provided
that this section should not apply. Therefore, the bill
specifically provides that the termination provision of the
FACA should not apply to the IMF advisory committee.
Congressional Accountability Act
The reporting requirement under section 102(b)(3) of the
Congressional Accountability Act (PL-104-1) is inapplicable
because this legislation does not relate to terms and
conditions of employment or access to public services or
accommodations.
Congressional Budget Office Cost Estimates and Federal Mandate Costs
Estimate
U.S. Congress,
Congressional Budget Office,
Washington, DC, March 16, 1998.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, House of
Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3114, the
International Monetary Fund Reform and Authorization Act of
1998.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Joseph C.
Whitehill.
Sincerely,
June E. O'Neill, Director.
Enclosure.
H.R. 3114--International Monetary Fund Reform and Authorization Act of
1998
Summary: H.R. 3114 would authorize appropriations for an
increase in the United States' quota in the International
Monetary Fund (IMF) equal to 10,622,500,000 Special Drawing
Rights (SDR) and for an increase in the authority to make loans
to the IMF equal to 2,462,000,000 SDR. In dollars, the
authorizations would amount to approximately $14.5 billion and
$3.4 billion, respectively. The authorizations would not
directly affect federal outlays.
In addition, the bill would create a new advisory
commission and would require additional reports. The new
requirements are estimated to cost less than $500,00 a year,
assuming the appropriation of the necessary funds.
Because H.R. 3114 would not affect direct spending or
receipts, pay-as-you-go procedures would not apply. The bill
contains no intergovernmental or private-sector mandates as
defined in the Unfunded Mandates Reform Act of 1995 (UMRA), and
would not affect the budgets of state, local, or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 3114 is shown in the following table.
The costs of this legislation fall within budget function 150
(international affairs) and budget function 800 (general
government).
----------------------------------------------------------------------------------------------------------------
By fiscal years, in millions of dollars--
-----------------------------------------------------
1998 1999 2000 2001 2002 2003
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION
Proposed Changes:
Authorization Level................................... 17,861 (\1\) (\1\) (\1\) (\1\) (\1\)
Estimated Outlays..................................... 0 (\1\) (\1\) (\1\) (\1\) (\1\)
----------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000.
Basis of estimate: The estimate assumes enactment of the
bill and subsequent appropriation of approximately $14.5
billion for the quota increase in the IMF and approximately
$3.4 billion for authority to lend to the IMF under the New
Arrangements to Borrow as requested by the President. The
authorizations in the bill are specified in terms of Special
Drawing Rights (or SDRs, a currency created by the IMF for the
use of IMF members). In recent months, one SDR has been worth
about $1.35.
The quota subscription would involve an exchange of
monetary assets between the Treasury and the IMF. The United
States would turn over one form of internationally acceptable
money and in exchange receive rights to draw international
reserves from the IMF pool. The IMF has requested that the U.S.
quota increase be paid in SDRs, which the United States would
ultimately purchase from other IMF members. Only one-quarter of
the $14.5 billion increase in the U.S. quota, or about $3.6
billion, would be transferred to the IMF in the form of SDRs.
The rest would be provided in a letter of credit, which the IMF
could draw on as needed. Similarly, the $3.4 billion for the
New Arrangements to Borrow would not involve cash payments to
the IMF unless circumstances threatened international economic
stability.
Exchanges of monetary assets--which change the composition
but not the level of the government's holdings of cash, or its
equivalent--are not counted as budgetary outlays. Accordingly,
increasing the United States' IMF quota would not directly
affect the budget surplus or deficit. The quota increase would
ultimately increase the federal debt because the Treasury would
have to purchase additional SDRs. To the extent that interest
earnings received from the IMF on reserve holdings differ from
the interest costs on the increase in the debt, the surplus or
deficit could be affected. In addition, there would be a chance
of gain or loss from currency fluctuations.
Finally, the bill would create a new advisory committee and
require the Treasury to prepare additional reports. CBO
estimates that preparing the reports and funding the advisory
committee would cost less than $0.5 million annually.
Pay-as-you-go considerations: None.
Intergovernmental and private-sector impact: The bill
contains no intergovernmental or private-sector mandates as
defined in UMRA and would not affect the budgets of state,
local, or tribal governments.
Estimate prepared by: Federal Costs: Joseph C. Whitehill.
Impact on State, Local, and Tribal Governments: Pepper
Santalucia. Impact on the Private Sector: Patrice Gordon.
Estimate approved by: Paul N. Van de Water, Assistant
Director for Budget Analysis.
Section-by-Section Analysis
Section 1. Short Title
This Act may be cited as the ``International Monetary Fund
Reform and Authorization Act of 1998.''
Section 2. Findings
This section includes Congressional findings with respect
to the International Monetary Fund and U.S. interests, the
social and economic impact of the Asian financial crisis, the
need for reforms of the IMF and the international financial
system, the need to minimized moral hazard, and the importance
of contributions by the private sector to resolutions of
financial crises.
Title I--International Monetary Fund
Sec. 101--Participation in Quota Increase. This section
authorizes the Administration's FY 1998 supplemental budget
request of the dollar equivalent of 10,622.5 billion SDRs
(approximately $14.5 billion in budget authority but with no
outlay effect) for an increase in the quota of the United
States in the IMF. The effectiveness of the authorization is
made subject to a certification by the Secretary of the
Treasury to the House and Senate authorizing committees that
investors and banks make a significant contribution in
conjunction with a financing package that, in the context of an
international financial crisis, might include taxpayer
supported official financing. The sentiment behind the adoption
of this provision and the identical one in section 201 below,
is to signal the strong opposition of the Committee to the
privatization of gain and the socialization of loss in
connection with an IMF-led financial stabilization effort.
Title II--New Arrangements to Borrow
Sec. 201--New Arrangements to Borrow. This section
authorizes the Administration's FY 1998 supplemental budget
request of the dollar equivalent of 2,462 billion SDRs
(approximately $3.4 billion not with no outlay effect) for U.S.
participation in the New Arrangements to Borrow. It would also
permit the dollar equivalent of 4,250 SDRs already authorized
by Section 17 of the Bretton Woods Agreements Act for the GAB
to be made available to the IMF under the NAB. The amount
previously authorized for the GAB would continue to be made
available under the GAB, although the NAB would be the facility
of first recourse. However, funds from the U.S. under the GAB
and NAB combined may not exceed the dollar equivalent of 6,712
billion SDRs. The effectiveness of the authorization is made
subject to a certification by the Secretary of the Treasury to
the Congressional authorizing committees that investors and
banks make a significant contribution in conjunction with a
financing package that, in the context of an international
financial crisis, might include taxpayer supported official
financing.
Title III--Policy Provisions
Sec. 301--Advocacy of Certain Policies. Section 301 amends
Title XV of the International Financial Institutions Act by
adding at the end a new section 1503. Section 301(a) directs
the Secretary of the Treasury to instruct U.S. Executive
Director of the IMF to use aggressively his or her voice and
vote to do the following: (1) vigorously promote policies to
increase the effectiveness of the IMF contributing to exchange
rate stability and avoiding competitive devaluations; (2)
vigorously promote policies to increase the effectiveness of
the IMF promoting market-oriented reform; (3) vigorously
promote policies to increase the effectiveness of the IMF, in
concert with appropriate international authorities and other
international financial institutions, in strengthening
financial systems in developing countries; (4) vigorously
promote policies to increase the effectiveness of the IMF, in
concert with appropriate international authorities and other
international financial institutions, in facilitating the
development and implementation of internationally financial
institutions, in facilitating the development and
implementation of internationally acceptable bankruptcy laws;
(5) vigorously promote policies that aim at appropriate burden-
sharing by the private sector so that investors and creditors
bear more fully the consequences of their decisions; (6)
vigorously promote policies that would make the IMF a more
effective mechanism, in concert with appropriate international
authorities and other international financial institutions, for
promoting good governance principles; (7) vigorously promote
the design of IMF programs and assistance so that governments
that borrow from the IMF channel public funds away from
unproductive purposes and toward investment in human and
physical capital, as well as social programs for the neediest;
(8) work with the IMF to foster economic prescriptions that are
tailored for individual borrowing countries; (9) structure IMF
programs and assistance so that the maintenance and improvement
of core labor standards are routinely incorporated as an
integral goal in the policy dialogue with recipient countries;
(10) vigorously promote the adoption and enforcement of laws
promoting respect for internationally recognized worker rights;
(11) vigorously promote IMF programs and policies to discourage
ethnic or social strife; (12) vigorously promote recognition by
the IMF of the need to promote policies for sustainable
development and environmental protection; (13) facilitate
greater IMF transparency; (14) facilitate greater IMF
accountability an enhance IMF self-evaluation; (15) vigorously
promote coordination with the World Bank and other
international financial institutions in promoting structural
reforms which facilitate the provision of credit to small
business, including microenterprise lending; (16) vigorously
promote, in the context of the IMF's policy dialogue with
member countries, measures to protect the rights and land of
indigenous peoples; (17) vigorously promotepolicies so that
when the IMF lends to member countries the Fund considers the extent to
which the borrowing country has demonstrated a commitment to
transparent defense budgets, reducing excessive military involvement in
the economy, and making substantial reductions of excessive military
expenditures; and (18) structure IMF debt relief programs so that they
do not impose unfair conditions on heavily indebted poor countries. the
section also requires the Secretary of the Treasury to coordinate with
other executive departments to the extent it would assist in achieving
the above policy goals.
The committee recognizes that several of the policy
provisions contained in Section 301(a) broadly reflect the
approach to the Asian crisis taken by the U.S. and the IMF.
Both with respect to the situation in Asia and in general, the
U.S. and the Fund are committed to policies that seek to
prevent competitive devaluations, promote market-oriented
reform, trade liberalization, and the adoption of sound banking
principles and practices. In this regard, the IMF-led
stabilization programs in Thailand, Indonesia, and south Korea
all emphasize measures to strengthen the domestic financial
system, the elimination of cronyism and corruption, the opening
of domestic capital markets, and structural reforms to break up
commodity monopolies and to open other protected areas of
economy to foreign competition. These changes should not only
help these countries stabilize their economies and promote
sustainable development, but also help to open markets and
create new opportunities for American businesses, workers, and
farmers.
With respect to market opening in agriculture, reference in
this section to ``agricultural commodities and products'' shall
refer to all agricultural commodities and products of
agricultural commodities in the broadest sense of the term,
including unprocessed timber and wood and wood products
processed to standards and specifications suitable for end
product use.
Weak banking systems are widely recognized to have
contributed to the development of the Asian crisis. The
Committee notes that open markets are particularly important in
finance where foreign banks and financial firms can assist in
capital formation and help to underpin robust financial
systems. As the IMF has observed, providing well-managed
financial institutions with access to developing as well as
developed markets promotes the spread of high-quality
management systems and professional skills, contributing to the
strengthening of ``credit culture.'' In the United States, for
example, over 26% of bank assets and approximately 38% of all
commercial and industrial loans are held by foreign banks. In
Hong Kong, foreign-owned banks hold roughly 70% of bank assets.
Little appears more counterproductive for countries than
protectionism in financial services. Likewise, to the extent
that sources of financial instability can be found in
microeconomic and institutional failings, including weakness in
domestic laws that undermine the collection of collateral, the
Committee supports efforts to develop credible international
bankruptcy standards.
The Committee understands that the genesis of the Asian
crisis had more to do with structural weaknesses in handling
large capital inflows than lax monetary or fiscal policies, and
that unlike Mexico the short-term external debts of the Asian
economies in difficulty are primarily to obligations of private
sector entities. Thus the Committee would strongly underscore
its concern that the IMF's role is not expanded from being a
last-resort stabilizer of currencies and economies to a lender
of last-resort to banking systems. The IMF can responsibly
stabilize economies to protect innocent bystanders against the
effects of financial contagion, but it is not the IMF's role to
bail out banks or other private creditors. Capitalists should
not be shielded from mistakes of capital allocation. In this
context, Section 301 of the bill references several elements of
a May 1996 G-10 study on the prevention and resolution of
sovereign liquidity crises, and strongly encourages the U.S. to
vigorously explore a variety of approaches to minimize moral
hazard with respect to creditors and debtors.
The Committee is aware that the U.S. has been pursuing an
active reform agenda within the IMF. Sound monetary and fiscal
policies should remain the cornerstone of IMF policy advice and
conditional lending to member governments. However, with the
strong support of the U.S. and other countries, the IMF has
also become an increasingly effective promoter of market-
oriented structural reforms--as demonstrated by its recent
programs in Asia. Further emphasis on appropriate structural
reforms by the IMF in conjunction with other international
financial institutions would be warranted. Areas of emphasis in
structural reform highlighted in this legislation include:
reform of governmental procurement policies to ensure a non-
biased, open, transparent and fair bidding process (utilizing
third party procurement services where appropriate); promoting
good governance by reducing opportunities for corruption; and
ensuring that scarce budgetary resources are channeled away
from unproductive purposes, including excessive military
spending, and toward investment in human and physical capital
as well as social safety nets.
The Committee believes that the establishment of core labor
standards and ensuring human rights are vital to successful
development, and has therefore included language in the
legislation ensuring that these issues receive a high priority
at the Department of the Treasury and the International
Monetary Fund. the legislation therefore directs the Secretary
of the Treasury Department to aggressively use the voice and
vote of the U.S. Executive Director of the IMF programs and
assistance so that the maintenance and improvement of core
labor standards are routinely incorporated as an integral goal
in the policy dialogue with recipient countries, in order to
achieve several important policy objectives enumerated in the
bill advancing worker projects. These objectives are: recipient
governments commit to affording the right to exercise
internationally recognized worker rights, including the right
of free association and collective bargaining through unions of
their own choosing; measures designed to facilitate labor
market flexibility are consistent with such core worker rights;
the staff of the IMF takes into account the views of the ILO,
particularly with respect to the effect of labor market
flexibility measures on core worker rights in such countries;
and the staff of the IMF surveys the labor market policies and
practices of recipient countries and recommends policy
initiatives that will help ensure the maintenance of
improvement of core labor standards.
Likewise, the Committee included language strongly
encouraging the U.S. to ensure that IMF stabilization plans are
tailored to address the specific causes of a particular
country's crisis, do not exacerbate social tensions or ethnic
strife, protect the rights and land of indigenous peoples, and
promote policies for sustainable development and environmental
protection.
The Committee recognizes that the U.S. demand for greater
Fund transparency has been controversial. Many IMF members
believe that the candor of the Fund's consultations with
governments and its access to highly sensitive exchange rate,
interest rate and other policy data, which are necessary for
the Fund to perform its mission, would be jeopardized if the
traditional confidentiality of its activities were not kept.
But it is the Committee's view that the kinds of deep
structural reforms the IMF is asking governments to carry out
are far more likely to be sustained if accompanied by broad
public understanding and support. Indeed, the IMF itself
appears to recognize the need for some increase in Fund
transparency. Although the Committee applauds these
improvements, the Administration is nevertheless urged to
redouble its efforts to ensure that to the maximum degree
possible, the Fund errs on the side of greater transparency and
disclosure.
The Committee strongly believes that full accountability
and objective evaluation of Fund operations and programs is
essential. In this regard, the Committee understands that in
1996, after repeated prodding from the United States, the IMF
agreed to strengthen the external and internal evaluation of
Fund programs and activities. First, the IMF agreed, for the
next several years, to commission 2-3 independent and external
evaluations a year. These external policy reviews are designed
to complement ongoing external audits. Second, the IMF also
agreed to strengthen its in-house evaluation of activities and
programs. Among these latter reforms, the Fund's Office of
Internal Audit and Review was reorganized and redesignated as
the Office of Internal Audit and Inspection. The Committee is
prepared to give these reforms the benefit of the doubt,
provided the principles that guide internal audit activities
include independence, effectiveness, transparency, and
comprehensiveness. To the extent that this internal evaluation
unit does not facilitate timely review of Fund programs and
afford the opportunity for policy changes, the Committee would
strongly support a separate evaluation office independent from
management and the Executive Board.
The Committee also included a provision referencing the
IMF's role in providing structural adjustment to poor
developing countries (funded by contributions to the Enhanced
Structural Adjustment Facility), and the Reform of the Heavily
Indebted Poor Countries Debt Initiative (HIPC). The HIPC
initiative is a framework supported by the United States, and
developed jointly by the World Bank and IMF, to address the
external debt problems of heavily indebted poor countries. Most
of the HIPCs are in Sub-Saharan Africa. The HIPC initiative
recognizes that simply providing new financing to help pay for
old financing was not an effective means for helping debtor
countries with unsustainable debt burdens. The initiative seeks
to reduce the debt burden of poor countries to sustainable
levels and thereby increase the resources available for private
sector economic activity, infrastructure development, and
poverty reduction. The Committee expects to continue its close
consultations with Treasury on this matter.
Section 301(b) requires the establishment of a new eight
member private sector advisory committee on IMF policy. The
eight members, to be appointed by the Secretary of the Treasury
after appropriate consultations with the relevant
organizations, shall be composed of 2 members each from:
organized labor, banking and financial services, industry and
agriculture, and nongovernmental environmental and human rights
organizations. The Advisory Committee shall meet not less
frequently than every six months with either the Secretary or
Deputy Secretary of the Treasury to review, and provide advice
on, the extent to which individual country IMF programs meet
the policy goals set forth in this legislation regarding the
IMF.
By creating a mechanism for regular interchange between the
Treasury Department and the private sector on the IMF, the
effectiveness of the Fund should be strengthened and U.S.
public support for its mission and programs be enhanced. The
Committee originally contemplated linking this important
consultative mechanism with the National Advisory Council on
International Monetary and Financial Policies (NAC), created in
1966 under Executive Order. However, the Committee concluded
that the NAC has become moribund and plays little or no
policymaking role. In addition, under Chapter 3 of Public Law
91-599, the NAC is required to present an annual report to
Congress. But the last report Congress received was the NAC
report for 1992. The Committee is concerned not only that the
NAC may have outlived its usefulness, but that Treasury has so
egregiously failed to produce required reports to Congress on a
timely basis. The Committee will not tolerate such tardiness in
the future.
Sec. 302--Availability of IMF letters of intent regarding
agreements required in order to receive assistance. This
section further amends Title XV of the International Financial
Institutions Act by adding a new section 1504 that requires the
Secretary of the Treasury to make letters of intent and similar
Fund documents available to the public seven calendar days
after receiving a copy of such documents from the U.S.
Executive Director of the IMF--or ten days after the Fund
itself receives or approves such documents. There are three
exceptions to this strong presumption in favor of full
transparency, when release of the documents would: endanger the
national security of the country or the U.S.; disrupt markets;
or be contrary to the obligations of the U.S. as a member of
the IMF. Should all or parts of such documents be withheld from
the public, the Committee expects those documents to be
promptly made available to Members (as they are now available
upon request) with a full explanation of why there was no
public disclosure. Given that the purpose of this section is to
encourage timely, open disclosure of IMF agreements, the
Committee expects these exceptions to be narrowly construed and
infrequently invoked. As noted earlier, the Committee strongly
encourages the Fund to work with member countries to ensure
public disclosure of documents and agreements, such as Article
IV consultations.
Sec. 303--Enforcement of Indonesian compliance with reforms
required by the IMF. This provision requires a certification by
the Secretary of the Treasury to the Congressional authorizing
committees that the U.S. Executive Director at the IMF will
oppose further disbursements of funds to Indonesia unless the
Indonesian government complies with the terms of its IMF
standby agreement. The Committee is greatly concerned that
continued delays in the full and demonstrable implementation of
IMF reforms in Indonesia will further undermine market
confidence there, with potential negative ramifications
throughout the region. In this regard, the IMF recently
announced that it would delay the second tranche of $10 billion
in loan commitments to Indonesia, worth roughly $3 billion.
While the Committee is mindful of the economic and social costs
of adjustment and the consequent need for reasonable policy
flexibility, implementation of IMF policy conditionality is
both critical to the success of the stabilization effort and to
mitigating the moral hazard associated with IMF-led financial
assistance packages.
Sec. 304--Sense of the Congress on the treatment of Muchtar
Pakpahan. This provision states the sense of Congress that the
government of Indonesia should immediately release the
independent labor leader Muchtar Pakpahan from prison and have
all criminal charges against him dismissed.
Sec. 305--Sense of the Congress on the role of Japan in
restoring regional and global economic growth. This provision
states the sense of Congress that Japan should assume a greater
regional leadership role in helping to resolve the ongoing
economic and financial crisis in Asia, a role which would
coincide with Japan's goal of promoting strong domestic demand-
led growth and avoiding a significant increase in its external
surplus with the U.S. and the countries of the Asia-Pacific
region.
title iv--reports
Sec. 401--Semiannual reports on financial stabilization
programs led by the IMF in connection with financing from the
Exchange Stabilization Fund. This section amends Title XVII of
the International Financial Institutions Act by adding at the
end a new section 1704. This provision requires the Secretary
of the Treasury, in consultation with the Secretary of Commerce
and other appropriate federal agencies, to prepare reports on
the implementation of financial stabilization programs led by
the IMF in countries in connection with which the U.S. has
either made a commitment to provide, or actually provided,
financing from the Exchange Stabilization Fund (ESF)
established by the Gold Reserve Act of 1934.
The Gold Reserve Act of 1934, as amended, provides that
consistent with the obligations of the U.S. in the IMF on
orderly exchange rates, the Secretary of the Treasury, with the
approval of the President, may deal in gold, foreign exchange,
and other instruments of credit and securities as necessary. A
loan or credit to a foreign entity or government of a foreign
country may be made for more than 6 months in a 12-month period
only if the President gives Congress a written statement that
unique or emergency circumstances require the loan to be for
more than six months. There have been no appropriations to the
ESF since 1934, as the ESF is self-financing. The
Administration has pledged $3 billion in supplemental
conditional financing to Indonesia, and another $5 billion to
South Korea, as a second line of defense in support of their
IMF-led financial stabilization packages. To date, there has
been no disbursement from the ESF in connection with these
programs. Although the Committee strongly opposes efforts to
restrict necessary Executive Branch flexibility in utilizing
the ESF, it likewise would emphasize the importance of
providing a complete accounting to the Congress in this report
on the use of this facility--including the extent to which the
extension of any credits through the ESF is backed by
collateral or other guarantees.
Section 401 provides for semi-annual reports on any IMF
financial stabilization programs in which the U.S. has either
pledged or used the resources of the ESF. With respect to these
reports, the Committee strongly urges the Secretary of the
Treasury, the Secretary of Commerce and other appropriate
federal agencies to focus particular attention on the
implementation of structural reforms in the sectors that in the
past have been the beneficiaries of significant government
support in East Asian countries, including the semi-conductor,
steel, and paper industries.
There is now a broad consensus that the Asian financial
crisis stems to a significant measure from overinvestment, and
from the practice of policy-based lending on non-commercial
terms to promote the rapid expansion of favored industries.
When world markets could not absorb the resulting excess
capacity, the prices for major export products of these
countries declined sharply, thereby threatening the ability of
the companies in these sectors to service the substantial and
often short-term foreign currency loans used to underwrite the
aggressive capacity expansion. The Committee concurs with the
assessment of Michel Camdessus, the Managing Director of the
IMF, who recently said ``the relationships among governments,
corporations, and financial institutions were so close * * *
that in the long run they could only result in unclear
accountability and disastrous investment and lending decisions,
ultimately banking sector health and impeding competition.''
The IMF-led financial stabilization programs in Asia, if
fully and faithfully implemented, should increase transparency
and promote market-based investment decisions. The goal of the
Fund's structural reforms is to sever the link between the
government, the financial sector, and corporations. Market
mechanisms must be allowed to work, even if this means allowing
those companies that are unable to sustain themselves on a
commercial basis to fail. The Committee is concerned that
countries in the region may attempt to rely solely on an
export-led recovery, including the practice of targeted
exports, in order to solve their economic difficulties. The
Committee believes that domestic demand-led recoveries are
preferable and more sustainable in the long run, as well as
more compatible with structural reform efforts that should
reduce excess capacity and eliminate economic inefficiencies.
The Committee supports the actions taken by the
Administration to pursue dispute settlement at the WTO against
Indonesian violations of the WTO Subsidies Code through
subsidies to the national care program, but the Committee is
concerned that this is the only action pursued by the
Administration since the new WTO Subsidies Code went into
effect on January 1, 1995. In light of all the testimony
received by the Committee on subsidies and other unfair trade
practices in areas spanning agriculture, autos, paper and wood
products, semi-conductors, and steel, the Committee urges the
Administration to vigilantly monitor and pursue these practices
at the WTO.
In particular, the Committee urges WTO attention to the
evidence of massive subsidies granted to Hanbo Steel, Korea's
second largest steel producer. The Committee understands that
this company declared bankruptcy in January 1997 after
receiving $5.8 billion in loans from government owned and
government directed banks. It has evidently continued to
receive government support since its bankruptcy filing and its
lenders may never be repaid. According to press reports,
however, government controlled POSCO is completing the Hanbo
steel complex. The Committee expects to work closely with the
committees of jurisdiction on this important trade issue, and
likewise expects Treasury and other appropriate federal
agencies to closely monitor implementation of Korean reforms
directed at corporate governance, corporate structure, and the
cessation of subsidized support or tax privileges to individual
corporations.
The Committee believes particular attention must be paid to
the accuracy of financial reports. The failure of governments
and the private sector in Asian countries that have received
financial assistance to maintain accurate financial and
accounting records, has been a major element of the crisis of
confidence in the region. It is critical that international
accounting standards be adopted and maintained by recipients of
IMF assistance.
To this end, the Committee feels strongly that the
conditions imposed in the IMF stabilization programs must be
monitored and enforced in the most effective manner possible.
The reporting requirements contained in this provision require
a high level of oversight by the Administration regarding
implementation of the stabilization programs. In this regard,
the Committee would be supportive of efforts through the
appropriations process to ensure that adequate funding is
available to place additional personnel with expertise in these
countries. The IMF and the U.S. must be prepared to react
rapidly when they see policies or practices being adopted that
contradict the letter or intent of the conditions contained in
the stabilization programs. If recipients of IMF-led financial
assistance are not implementing agreed upon reforms, the U.S.
must strongly consider recommending to the IMF that the Fund
withhold future disbursements under such programs until
satisfactory steps are taken in these countries to implement
the conditions.
Sec. 402--Reports on Reforming the Architecture of the
International Financial System. The purpose of this provision
is help to protect the U.S. from future international financial
upheavals and to promote reforms in the international financial
system by strengthening U.S. efforts to improve the performance
of the IMF and the financial practices of the nations receiving
IMF assistance. In addition to providing the policy guidance on
international financial reform discussed below, the section
also requires several interim and one final report by the
Secretary of the Treasury to several Congressional committees
regarding progress made toward enhancing the stability of the
international financial system.
In the wake of the Mexican financial crisis, the U.S. and
other G-7 nations agreed that the international community must
take steps to improve its ability to address the risks inherent
in the dramatic growth of private capital flows, the increased
integration of domestic capital markets, and greater recourse
to financial innovations. The IMF has carried out a number of
these initiatives launched by the G-7 countries at the June
1995 Halifax Summit.
The clear emphasis in these initiatives was to strengthen
early warning systems, through improved and more effective
surveillance of national economic policies and financial market
developments by the IMF and fuller disclosure of key
information to market participants. The most significant
achievement has been the establishment, in April 1996, in the
IMF of the voluntary Special Data Dissemination Standard for
provision of economic and financial statistics to the public.
In addition, prior to the onset of the Asian crisis, the Fund
had begun work on in strengthening financial supervision in
emerging market economies.
In retrospect, however, it is evident that these efforts to
promote stability in a globalized economy lost momentum and did
not go far enough. Despite the Halifax reforms, the IMF was not
successful in anticipating and/or preventing the full extent of
the Asian crisis. But this is probably also an unrealistic
objective. Even when the IMF believes a country is pursuing
unsustainable economic policies, it cannot compel a country to
take policy measures if it is unwilling. The example of Mexico
in 1994-1995 is widely recognized as an example of the Fund
failing to anticipate a serious financial crisis, while the
case of Thailand in 1996-1997 may emerge as an example of
timely advice going unheeded.
The Committee is also cognizant that the issues are
extremely complex, are perhaps not yet fully understood by the
most sophisticated financial authorities and market
participants, and will need to be addressed in a multilateral
context. Consequently, the Committee identifies several areas
of weakness in present international financial system and finds
that the Treasury and Federal Reserve should seek to establish
robust and common international standards with respect to
private sector accounting and disclosure, disclosure of cross-
border financial flows, banking standards and supervision, open
investment rules, and acceptable bankruptcy rules and
procedures. The Committee strongly expects to continue close
consultations with the Treasury and Federal Reserve on these
and related matters.
Nonetheless, as Chairman Greenspan has testified, it is
prudent to expect that despite current and future efforts at
risk containment and prevention the system may fail in some
instances, ``triggering vicious cycles and all the associated
contagion for innocent bystanders.'' By providing a backup
source of highly conditional international financial support,
the IMF plays an essential stabilizing role. While the last
half of the twentieth century has hardly been crisis free, it
has featured nothing like the deep and prolonged global
economic downturns that characterized earlier eras.
Sec. 403--Annual report and testimony on the state of the
international financial system, IMF reform, and compliance with
IMF agreements. This section amends Title XVII of the
International Financial Institutions Act by adding at the end a
new section 1705, requiring an annual report and testimony on
the state of the international financial system, IMF reform,
and compliance with IMF agreements by the Secretary of the
Treasury. The purpose of the annual report is to provide the
Congressional authorizing committees an assessment of the
extent to which progress has been made by the U.S. in
influencing the IMF to adopt the policies and reform in its
internal procedures through utilizing the voice and vote of the
U.S. Executive Director. The purpose of the annual testimony by
the Secretary of the Treasury is to provide the authorizing
committees with a thorough overview of U.S. interests and
leadership in the international financial system, with specific
reference to: progress made in reforming the IMF; the status of
efforts to reform the international financial system; and the
compliance of countries which have received assistance from the
IMF with agreements made as a condition of receiving
assistance.
Sec. 404--Audits of the international monetary fund. This
provision further amends Title VII of the International
Financial Institution Act by adding a new section 1706,
regarding audits of the IMF. It requires a certification by the
Secretary of the Treasury to the authorizing committees of
Congress that the Secretary has instructed the U.S. Executive
Director at the IMF to facilitate timely access by the GAO to
information and documents of the IMF needed by the GAO to
perform financial reviews of the Fund. It further requires by
June 30, 1999, and annually thereafter the GAO shall prepare
and submit to the above Congressional committees a report on
the financial operations of the Fund during the preceding year.
The Committee expects to consult closely with GAO regarding the
production of this report.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3 of rule XIII of the Rules of the
House of Representatives, changes in existing law made by the
bill, as reported, are shown as follows (existing law proposed
to be omitted is enclosed in black brackets, new matter is
printed in italic, existing law in which no change is proposed
is shown in roman):
BRETTON WOODS AGREEMENTS ACT
* * * * * * *
Sec. 17. (a) In order to carry out the purposes of the
decision of January 5, 1962, [and February 24, 1983] February
24, 1983, and January 27, 1997, as amended in accordance with
their terms, of the Executive Directors of the International
Monetary Fund, the Secretary of the Treasury is authorized to
make loans, in an amount not to exceed the equivalent of
[4,250,000,000] 6,712,000,000 Special Drawing Rights, limited
to such amounts as are provided in advance in appropriations
Acts, except that prior to activation, the Secretary of the
Treasury shall certify that supplementary resources are needed
to forestall or cope with an impairment of the international
monetary system and that the Fund has fully explored other
means of funding, to the Fund under article VII, section 1(i),
of the Articles of Agreement of the Fund. Any loan under the
authority granted in this subsection shall be made with due
regard to the present and prospective balance of payments and
reserve position of the United States.
(b) For the purpose of making loans to the International
Monetary Fund pursuant to this section, there is hereby
authorized to be appropriated [4,250,000,000] 6,712,000,000
Special Drawing Rights, except that prior to activation, the
Secretary of the Treasury shall certify whether supplementary
resources are needed to forestall or cope with an impairment of
the international monetary system and that the Fund has fully
explored other means of funding, to remain available until
expended to meet calls by the International Monetary Fund. Any
payments made to the United States by the International
Monetary Funds as a repayment on account of the principal of a
loan made under this section shall continue to be available for
loans to the International Monetary Fund.
* * * * * * *
(d) Unless the Congress by law so authorizes, neither the
President, the Secretary of the Treasury, nor any other person
acting on behalf of the United States, may instruct the United
States Executive Director to the Fund to consent to any
amendment to the Decision of February 24, 1983, or the Decision
of January 27, 1997, of the Executive Directors of the Fund, if
the adoption of such amendment would significantly alter the
amount, terms, or conditions of participation by the United
States in the General Arrangements to Borrow or the New
Arrangements to Borrow, as applicable.
* * * * * * *
SEC. 61. QUOTA INCREASE.
(a) In General.--The United States Governor of the Fund may
consent to an increase in the quota of the United States in the
Fund equivalent to 10,622,500,000 Special Drawing Rights.
(b) Subject to Appropriations.--The authority provided by
subsection (a) shall be effective only to such extent or in
such amounts as are provided in advance in appropriations Acts.
----------
INTERNATIONAL FINANCIAL INSTITUTIONS ACT
TITLE XV--OTHER POLICIES
* * * * * * *
SEC. 1503. ADVOCACY OF POLICIES TO ENHANCE THE GENERAL EFFECTIVENESS OF
THE INTERNATIONAL MONETARY FUND.
(a) In General.--The Secretary of the Treasury shall instruct
the United States Executive Director of the International
Monetary Fund to use aggressively the voice and vote of the
Executive Director to do the following:
(1) Vigorously promote policies to increase the
effectiveness of the International Monetary Fund in
structuring programs and assistance so as to promote
policies and actions that will contribute to exchange
rate stability and avoid competitive devaluations that
will further destabilize the international financial
and trading systems.
(2) Vigorously promote policies to increase the
effectiveness of the International Monetary Fund in
promoting market-oriented reform, trade liberalization,
economic growth, democratic governance, and social
stability through--
(A) appropriate liberalization of pricing,
trade, investment, and exchange rate regimes of
countries to open countries to the competitive
forces of the global economy;
(B) opening domestic markets to fair and open
internal competition among domestic enterprises
by eliminating inappropriate favoritism for
small or large businesses, eliminating elite
monopolies, creating and effectively
implementing anti-trust and anti-monopoly laws
to protect free competition, and establishing
fair and accessible legal procedures for
dispute settlement among domestic enterprises;
(C) privatizing industry in a fair and
equitable manner that provides economic
opportunities to a broad spectrum of the
population, eliminating government and elite
monopolies, closing loss-making enterprises,
and reducing government control over the
factors of production;
(D) economic deregulation by eliminating
inefficient and overly burdensome regulations
and strengthening the legal framework
supporting private contract and intellectual
property rights;
(E) establishing or strengthening key
elements of a social safety net to cushion the
effects on workers of unemployment and
dislocation; and
(F) encouraging the opening of markets for
agricultural commodities and products by
requiring recipient countries to make efforts
to reduce trade barriers.
(3) Vigorously promote policies to increase the
effectiveness of the International Monetary Fund, in
concert with appropriate international authorities and
other international financial institutions (as defined
in section 1701(c)(2)), in strengthening financial
systems in developing countries, and encouraging the
adoption of sound banking principles and practices,
including the development of laws and regulations that
will help to ensure that domestic financial
institutions meet strong standards regarding capital
reserves, regulatory oversight, and transparency.
(4) Vigorously promote policies to increase the
effectiveness of the International Monetary Fund, in
concert with appropriate international authorities and
other international financial institutions (as defined
in section 1701(c)(2)), in facilitating the development
and implementation of internationally acceptable
domestic bankruptcy laws and regulations in developing
countries, including the provision of technical
assistance as appropriate.
(5) Vigorously promote policies that aim at
appropriate burden-sharing by the private sector so
that investors and creditors bear more fully the
consequences of their decisions, and accordingly
advocate policies which include--
(A) strengthening crisis prevention and early
warning signals through improved and more
effective surveillance of the national economic
policies and financial market development of
countries (including monitoring of the
structure and volume of capital flows to
identify problematic imbalances in the inflow
of short and medium term investment capital,
potentially destabilizing inflows of offshore
lending and foreign investment, or problems
with the maturity profiles of capital to
provide warnings of imminent economic
instability), and fuller disclosure of such
information to market participants;
(B) accelerating work on strengthening
financial systems in emerging market economies
so as to reduce the risk of financial crises;
(C) consideration of provisions in debt
contracts that would foster dialogue and
consultation between a sovereign debtor and its
private creditors, and among those creditors;
(D) consideration of extending the scope of
the International Monetary Fund's policy on
lending to members in arrears and of other
policies so as to foster the dialogue and
consultation referred to in subparagraph (C);
(E) intensified consideration of mechanisms
to facilitate orderly workout mechanisms for
countries experiencing debt or liquidity
crises;
(F) consideration of establishing ad hoc or
formal linkages between the provision of
official financing to countries experiencing a
financial crisis and the willingness of market
participants to meaningfully participate in any
stabilization effort led by the International
Monetary Fund;
(G) using the International Monetary Fund to
facilitate discussions between debtors and
private creditors to help ensure that financial
difficulties are resolved without inappropriate
resort to public resources;
(H) the International Monetary Fund
accompanying the provision of funding to
countries experiencing a financial crisis
resulting from imprudent borrowing with efforts
to achieve a significant contribution by the
private creditors, investors, and banks which
had extended such credits; and
(I) in the context of International Monetary
Fund responses to international financial
crises, vigorously promote consideration of
appropriate ways in which debtors and private
creditors, in consultation with central banks,
can be encouraged voluntarily to take steps to
achieve resolution of outstanding debts, and to
do so in a manner that provides for an
appropriate degree of burden-sharing.
(6) Vigorously promote policies that would make the
International Monetary Fund a more effective mechanism,
in concert with appropriate international authorities
and other international financial institutions (as
defined in section 1701(c)(2)), for promoting good
governance principles within recipient countries by
fostering structural reforms, including procurement
reform, that reduce opportunities for corruption and
bribery, and drug-related money laundering.
(7) Vigorously promote the design of International
Monetary Fund programs and assistance so that
governments that draw on the International Monetary
Fund channel public funds away from unproductive
purposes, including large ``show case'' projects and
excessive military spending, and toward investment in
human and physical capital as well as social programs
to protect the neediest and promote social equity.
(8) Work with the International Monetary Fund to
foster economic prescriptions that are appropriate to
the individual economic circumstances of each recipient
country, recognizing that inappropriate stabilization
programs may only serve to further destabilize the
economy and create unnecessary economic, social, and
political dislocation.
(9) Structure International Monetary Fund programs
and assistance so that the maintenance and improvement
of core labor standards are routinely incorporated as
an integral goal in the policy dialogue with recipient
countries, so that--
(A) recipient governments commit to affording
workers the right to exercise internationally
recognized core worker rights, including the
right of free association and collective
bargaining through unions of their own
choosing;
(B) measures designed to facilitate labor
market flexibility are consistent with such
core worker rights;
(C) the staff of the International Monetary
Fund adequately takes into account the views of
the International Labor Organization,
particularly with respect to the effect of
labor market flexibility measures on core
worker rights in such countries; and
(D) the staff of the International Monetary
Fund surveys the labor market policies and
practices of recipient countries and recommends
policy initiatives that will help to ensure the
maintenance or improvement of core labor
standards.
(10) Vigorously promote the adoption and enforcement
of laws promoting respect for internationally
recognized worker rights (as defined in section 507(4)
of the Trade Act of 1974 (19 U.S.C. 2467(4))).
(11) Vigorously promote International Monetary Fund
programs and assistance that are structured to the
maximum extent feasible to discourage practices which
may promote ethnic or social strife in a recipient
country.
(12) Vigorously promote recognition by the
International Monetary Fund that macroeconomic
developments and policies can affect and be affected by
environmental conditions and policies, including by
working independently and with the multilateral
development banks to encourage countries to correct
market failures and pursue macroeconomic stability
while promoting policies for sustainable development
and environmental protection.
(13) Facilitate greater International Monetary Fund
transparency, including by enhancing accessibility of
the International Monetary Fund and its staff,
fostering a more open release policy toward working
papers, past evaluations, and other International
Monetary Fund documents, seeking to publish all Letters
of Intent to the International Monetary Fund and Policy
Framework Papers, and establishing a more open release
policy regarding Article IV consultations.
(14) Facilitate greater International Monetary Fund
accountability and enhance International Monetary Fund
self-evaluation by vigorously promoting review of the
effectiveness of the Office of Internal Audit and
Inspection and the Executive Board's external
evaluation pilot program and, if necessary, the
establishment of an operations evaluation department
modeled on the experience of the International Bank for
Reconstruction and Development, guided by such key
principles as usefulness, credibility, transparency,
and independence.
(15) Vigorously promote coordination with the
International Bank for Reconstruction and Development
and other international financial institutions (as
defined in section 1701(c)(2)) in promoting structural
reforms which facilitate the provision of credit to
small businesses, including microenterprise lending,
especially in the world's poorest, heavily indebted
countries.
(16) Vigorously promote, in the context of the
International Monetary Fund's policy dialogue with its
member countries, measures to protect the rights and
land of indigenous peoples, including the Penan of
Borneo, Malaysia, the Dayaks of East Kalimantan,
Indonesia, and the indigenous communities of Irian
Jaya, Indonesia.
(17) Vigorously promote policies such that the
International Monetary Fund, in considering loan
programs and assistance, takes into account the extent
to which the recipient government has demonstrated a
commitment to--
(A) providing accurate and complete data on
the annual expenditures and receipts of the
armed forces;
(B) establishing good and publicly
accountable governance, including an end to
excessive military involvement in the economy;
and
(C) making substantial reductions in
excessive military spending and forces,
including domestic security forces.
(18) Structure International Monetary Fund debt
relief programs so that the programs do not impose
unfair conditions on heavily indebted poor countries,
increase the amount of debt relief available to poor
countries, and decrease the time required to qualify
for debt relief.
(b) Coordination With Other Executive Departments.--To the
extent that it would assist in achieving the goals described in
subsection (a), the Secretary of the Treasury shall pursue the
goals in coordination with the Secretary of State, the
Secretary of Labor, the Secretary of Commerce, the
Administrator of the Environmental Protection Agency, the
Administrator of the Agency for International Development, and
the United States Trade Representative.
SEC. 1504. AVAILABILITY OF INTERNATIONAL MONETARY FUND LETTERS OF
INTENT REGARDING AGREEMENTS REQUIRED IN ORDER TO
RECEIVE ASSISTANCE.
Within 3 business days after the United States Executive
Director at the International Monetary Fund receives a letter
of intent from a country regarding structural adjustment or an
economic, social, or other agreement required by the Fund in
order to receive assistance from the Fund, the Executive
Director shall provide to the Secretary of the Treasury a copy
of the letter and any related memorandum of understanding.
Within 7 days after receiving the copy, the Secretary of the
Treasury shall make the copy available to the public (by
electronic or other readily and publicly accessible means)
except to the extent that the Secretary determines that doing
so would--
(1) endanger the national security of the country or
of the United States;
(2) disrupt markets; or
(3) be contrary to the obligations of the United
States as a member of the International Monetary Fund.
* * * * * * *
TITLE XVII--CONSOLIDATED REPORTING REQUIREMENTS
SEC. 1701. ANNUAL REPORT BY CHAIRMAN OF THE NATIONAL ADVISORY COUNCIL
ON INTERNATIONAL MONETARY AND FINANCIAL POLICIES.
(a) * * *
* * * * * * *
(e) Advisory Committee on IMF Policy.--
(1) In general.--The Secretary of the Treasury shall
establish an International Monetary Fund Advisory
Committee (in this subsection referred to as the
``Advisory Committee'').
(2) Membership.--The Advisory Committee shall consist
of 8 members appointed by the Secretary of the
Treasury, after appropriate consultations with the
relevant organizations, as follows:
(A) 2 members shall be representatives from
organized labor.
(B) 2 members shall be representatives from
banking and financial services.
(C) 2 members shall be representatives from
industry and agriculture.
(D) 2 members shall be representatives from
nongovernmental environmental and human rights
organizations.
(3) Duties.--Not less frequently than every 6 months,
the Advisory Committee shall meet with the Secretary of
the Treasury or the Deputy Secretary of the Treasury to
review, and provide advice on, the extent to which
individual country International Monetary Fund programs
meet the policy goals set forth in this Act regarding
the International Monetary Fund.
(4) Inapplicability of termination provision of the
federal advisory committee act.--Section 14(a)(2) of
the Federal Advisory Committee Act shall not apply to
the Advisory Committee.
* * * * * * *
SEC. 1704. REPORTS ON FINANCIAL STABILIZATION PROGRAMS LED BY THE
INTERNATIONAL MONETARY FUND IN CONNECTION WITH
FINANCING FROM THE EXCHANGE STABILIZATION FUND.
(a) In General.--The Secretary of the Treasury, in
consultation with the Secretary of Commerce and other
appropriate Federal agencies, shall prepare reports on the
implementation of financial stabilization programs (and any
material terms and conditions thereof) led by the International
Monetary Fund in countries in connection with which the United
States has made a commitment to provide, or has provided
financing from the stabilization fund established under section
5302 of title 31, United States Code. The reports shall include
the following:
(1) A description of the condition of the economies
of countries requiring the financial stabilization
programs, including the monetary, fiscal, and exchange
rate policies of the countries.
(2) A description of the degree to which the
countries requiring the financial stabilization
programs have fully implemented financial sector
restructuring and reform measures required by the
International Monetary Fund, including--
(A) ensuring full respect for the commercial
orientation of commercial bank lending;
(B) ensuring that governments will not
intervene in bank management and lending
decisions (except in regard to prudential
supervision);
(C) the passage of appropriate financial
reform legislation;
(D) strengthening the domestic financial
system, through financial sector restructuring,
as well as improved transparency and
supervision; and
(E) the opening of domestic capital markets.
(3) A description of the degree to which the
countries requiring the financial stabilization
programs have fully implemented reforms required by the
International Monetary Fund that are directed at
corporate governance and corporate structure,
including--
(A) making nontransparent conglomerate
practices more transparent through the
application of internationally accepted
accounting practices, independent external
audits, full disclosure, and provision of
consolidated statements; and
(B) ensuring that no government subsidized
support or tax privileges will be provided to
bail out individual corporations, particularly
in the semiconductor, steel, and paper
industries.
(4) A description of the implementation of reform
measures required by the International Monetary Fund to
deregulate and privatize economic activity by ending
domestic monopolies, undertaking trade liberalization,
and opening up restricted areas of the economy to
foreign investment and competition.
(5) A detailed description of the trade policies of
the countries, including any unfair trade practices or
adverse effects of the trade policies on the United
States.
(6) A description of the extent to which the
financial stabilization programs have resulted in
appropriate burden-sharing among private sector
creditors, including rescheduling of outstanding loans
by lengthening maturities, agreements on debt
reduction, and the extension of new credit.
(7) A description of the extent to which the economic
adjustment policies of the International Monetary Fund
and the policies of the government of the country
adequately balance the need for financial
stabilization, economic growth, environmental
protection, social stability, and equity for all
elements of the society.
(8) Whether International Monetary Fund involvement
in labor market flexibility measures has had a negative
effect on core worker rights, particularly the rights
of free association and collective bargaining.
(9) A description of any pattern of abuses of core
worker rights in recipient countries.
(10) The amount, rate of interest, and disbursement
and repayment schedules of any funds disbursed from the
stabilization fund established under section 5302 of
title 31, United States Code, in the form of loans,
credits, guarantees, or swaps, in support of the
financial stabilization programs.
(11) The amount, rate of interest, and disbursement
and repayment schedules of any funds disbursed by the
International Monetary Fund to the countries in support
of the financial stabilization programs.
(b) Timing.--Not later than October 1, 1998, and semiannually
thereafter, the Secretary of the Treasury shall submit to the
Committees on Banking and Financial Services and International
Relations of the House of Representatives and the Committees on
Foreign Relations, and Banking, Housing, and Urban Affairs of
the Senate a report on the matters described in subsection (a).
SEC. 1705. ANNUAL REPORT AND TESTIMONY ON THE STATE OF THE
INTERNATIONAL FINANCIAL SYSTEM, IMF REFORM, AND
COMPLIANCE WITH IMF AGREEMENTS.
(a) Reports.--Not later than October 1 of each year, the
Secretary of the Treasury shall submit to the Committee on
Banking and Financial Services of the House of Representatives
and the Committee on Foreign Relations of the Senate a written
report on the progress (if any) made by the United States
Executive Director at the International Monetary Fund in
influencing the International Monetary Fund to adopt the
policies and reform its internal procedures in the manner
described in section 1503.''.
(b) Testimony.--After submitting the report required by
subsection (a) but not later than October 31 of each year, the
Secretary of the Treasury shall appear before the Committee on
Banking and Financial Services of the House of Representatives
and the Committee on Foreign Relations of the Senate and
present testimony on--
(1) any progress made in reforming the International
Monetary Fund;
(2) the status of efforts to reform the international
financial system; and
(3) the compliance of countries which have received
assistance from the International Monetary Fund with
agreements made as a condition of receiving the
assistance.
SEC. 1706. AUDITS OF THE INTERNATIONAL MONETARY FUND.
(a) Access to Materials.--Not later than 30 days after the
date of the enactment of this section, the Secretary of the
Treasury shall certify to the Committee on Banking and
Financial Services of the House of Representatives and the
Committee on Foreign Relations of the Senate that the Secretary
has instructed the United States Executive Director at the
International Monetary Fund to facilitate timely access by the
General Accounting Office to information and documents of the
International Monetary Fund needed by the Office to perform
financial reviews of the International Monetary Fund that will
facilitate the conduct of United States policy with respect to
the Fund.
(b) Reports.--Not later than June 30, 1999, and annually
thereafter, the Comptroller General of the United States shall
prepare and submit to the committees specified in subsection
(a) a report on the financial operations of the Fund during the
preceding year, which shall include--
(1) the current financial condition of the
International Monetary Fund;
(2) the amount, rate of interest, disbursement
schedule, and repayment schedule for any loans that
were initiated or outstanding during the preceding
calendar year, and with respect to disbursement
schedules, the report shall identify and discuss in
detail any conditions required to be fulfilled by a
borrower country before a disbursement is made;
(3) a detailed description of whether the trade
policies of borrower countries permit free and open
trade by the United States and other foreign countries
in the borrower countries;
(4) a detailed description of the export policies of
borrower countries and whether the policies may result
in increased export of their products, goods, or
services to the United States which may have
significant adverse effects on, or result in unfair
trade practices against or affecting United States
companies, farmers, or communities;
(5) a detailed description of any conditions of
International Monetary Fund loans which have not been
met by borrower countries, including a discussion of
the reasons why such conditions were not met, and the
actions taken by the International Monetary Fund due to
the borrower country's noncompliance;
(6) an identification of any borrower country and
loan on which any loan terms or conditions were
renegotiated in the preceding calendar year, including
a discussion of the reasons for the renegotiation and
any new loan terms and conditions; and
(7) a specification of the total number of loans made
by the International Monetary Fund from its inception
through the end of the period covered by the report,
the number and percentage (by number) of such loans
that are in default or arrears, and the identity of the
countries in default or arrears, and the number of such
loans that are outstanding as of the end of period
covered by the report and the aggregate amount of the
outstanding loans and the average yield (weighted by
loan principal) of the historical and outstanding loan
portfolios of the International Monetary Fund.
* * * * * * *
DISSENTING VIEWS OF REPRESENTATIVE DAVE WELDON AND REPRESENTATIVE VINCE
SNOWBARGER
We write to express our opposition to H.R. 3114, or any
legislation providing additional funding to the International
Monetary Fund (IMF). We oppose this additional funding for the
IMF for several reasons.
First, some have attempted to create a crisis mentality
over this bill, ``Pass this bill or we will experience a world
depression.'' During consideration of H.R. 3114 before the
committee, many members talked about how much this money was
needed. The facts simply do not match up with the crisis
mentality. The fact is, according to testimony before the
committee and the admission of many who have looked into this
issue in great detail, the IMF has enough money to take care of
the current crisis and possibly has enough to handle another
``Asian flu'' size crisis with its current liquid reserves,
General Arrangements to Borrow (GAB), and near-term income.
A review by the Heritage Foundation estimates that the IMF
has $40 to $50 billion in liquid reserves. Additionally the IMF
has GAB another $17 billion to $25 billion. Furthermore, if you
add near term income which is somewhere in the range of $28
billion if recent trends continue, the IMF has somewhere in the
neighborhood of $85 to $100 billion in available near-term
assets. This is more than enough money to deal with another
Asian-size crisis.
A study by the Joint Economic Committee finds that even
after the Asian bailout, the IMF will hold about $30 billion in
gold reserves and $25 billion in GAB. When added to an
estimated $28 billion in near term income, this total reaches
$83 billion.
Because of the level of IMF reserves, should there be
another crisis that needs immediate attention, the IMF does
have the resources to act. There is no crisis or shortfall in
the IMF's budget as many would like for us to believe.
Second, some have argued that the IMF is achieving its
goals in countries like South Korea, Thailand, and perhaps
Indonesia by releasing funds in parcels (referred to as
tranches). By letting funds flow from the IMF to these troubled
nations in tranches, it is argued that the IMF has leverage and
is exercising influence over the actions these nations are
taking to reform their business, government, and financial
systems. If indeed this is the case, it is a new and improved
action by the IMF, and we must ask ourselves how the United
States can best ensure that they follow the direction of the
U.S. representative to the IMF to the greatest extent.
We believe that the best way for the U.S. to exercise
influence over the IMF is to refuse to give them another $18
billion. This will enable us to maximize U.S. leverage over the
IMF to ensure that the IMF is using our tax dollars to pursue
the goals that this Congress has set forth. That is the best
way to ensure that the IMF pursues the goals set forth by this
Congress and the Administration in the area of human rights,
labor rights, market reforms, bankruptcy reforms, and
transparency.
Unfortunately, the manner in which the IMF was set up does
not enable the Congress to bind the IMF to follow certain
policies. We can, however, influence the IMF in two ways.
First, the Congress can and does instruct the U.S.
representative to the IMF to use our voice and vote to pursue
certain policies. This has limited success. Second, we can keep
the pressure on the IMF by not writing them a check for $18
billion. Once the U.S. writes an $18 billion check to the IMF,
we remove the pressure and leverage that we have over them, and
they can choose to ignore, or at least discount the voice and
vote of the U.S.
For those interested in achieving the goals set forth in
H.R. 3114, the best way to achieve these goals is to reject the
$18 billion transfer of funds to the IMF. We can best achieve
these goals by voting down this funding at this time and
keeping the pressure on the IMF to make the reforms this
Congress would like to see. Let's give the IMF more time to
prove that they are really interested in pursuing the goals set
forth by the U.S. A vote for this $18 billion is a vote to give
away our leverage, clear and simple. Once the coffers are
refilled, while we don't lose all our leverage, the amount of
leverage we do have will be diminished.
We believe we should not lose this opportunity to achieve
our goals by tossing away the best tool we have to influence
policy and maintain leverage.
Dave Weldon.
Vince Snowbarger.
DISSENTING VIEW BY RON PAUL
H.R. 3114 should be rejected. We should provide no
additional funds to the International Monetary Fund. Created in
the postwar era as an institution to manage the global fixed
exchange rate system, the IMF lost any remaining justification
for United States' continued involvement when President Richard
Nixon closed the gold window in 1971. The IMF's charge of
maintaining ``pegged but adjustable exchange rates'' no longer
suits the current global financial system. The IMF has not
proven to be an effective tool in managing international
currencies and has done nothing to effectively warn us of the
dangers that have marred the international financial system
over the past several years. The bail-out of Mexico three years
ago only served to encourage the same monetary policies that
are now giving us the crisis in Southeast Asia. We are at a
point in our history where formidable figures, like former
Secretaries of the Treasury Simon and Schultz, are calling for
getting out of the IMF, and Congress should give that serious
consideration.
cause of the current problem
The basic cause of the current crisis the various nations
are facing in Southeast Asia, comes from a flawed monetary
policy. These countries have inflated their currencies at a 20
to 30% rate over the past decade which has led to mal-
investment, excess debt, over capacity, and an artificial boom
period which predictably leads to a corrective bust.
Fluctuating flat currencies, according to sound monetary
theory, always produces financial and monetary chaos. Without
considering the basic cause of the problems that exist in
Southeast Asia, we are unable to devise sound policy here at
home or internationally.
The most important Congressional responsibility, with
regards to currencies, is to maintain a sound dollar. It's now
been 27 years since our currency has been linked to gold. Since
that time the dollar has lost more than 50% of its value. The
Constitution mandates that only silver and gold can be legal
tender, and because this admonition has been ignored in dollar
terms, gold has gone up nearly tenfold. If we continue to
follow current policy of bailing out foreign countries through
appropriations and further credit expansion, we do exactly the
opposite of what we should be doing. This will further
undermine the value of the dollar, expand our trade imbalances
and lead to a crisis in the United States similar to that which
Southeast Asia is facing today. We should never lose sight of
our responsibility to maintain the value of the dollar. We
certainly should never deliberately undermine the value of the
dollar in a feeble attempt to prop up the value of other
currencies, for whatever reason.
Great danger lies ahead. I agree that the markets are in
great danger but this is no justification for doing the wrong
thing. It is true that protectionist sentiments may well result
from current conditions. Obviously, competitive devaluations
are even more troublesome than the lesser efforts at
protectionism through tariffs. All world governments and
central banks have embarked on a program of systematic
inflation of their respective currencies which serve to lower
their value in the marketplace. The currency crises and trade
disruptions are indeed very serious because, if uncorrected,
they will lead to political chaos. My disagreement with those
who have expressed the concern about the impending danger is
that we ought not continue the very policy that brought
Southeast Asia their crisis.
The only answer is a new approach to understanding
currencies. A universal worldwide currency controlled by the
marketplace and not the politicians would go a long way toward
solving many of our financial and trade problems. Just as it
would be devastating for the United States to have 50 different
currencies, it is chronically disruptive for hundreds of
countries throughout the world expanding credit at different
rates and pretending that a sound efficient economy can operate
under those conditions. The serious shortcoming of chronic
currency devaluation is that although the money supply may
gradually increase, the ramifications of these increases do not
come in the same manner--they come with sudden jolts to the
value of the currency as well as to consumer prices.
There are three significant reasons why we in the Congress
should oppose the IMF bailout: moral, economic and political.
It's morally wrong to take funds from innocent taxpayers and
give this to special interests, whether they be foreign
corporations, foreign governments or for the benefit of the
lending agencies in this country, as well as U.S. corporations
who have invested in Southeast Asia. A lack of understanding of
how credit creation undermines the value of the dollar will
make it difficult, it not impossible, to prevent the currency
crisis from affecting our economy; transferring wealth from one
country to another, diluting the value of stronger currency for
the benefit of a poorer currency, can never rectify the serious
harm done by decades of monetary mischief. Redistributing
wealth through government undermines the political foundations
of voluntary exchange and prosperity.
The amendment offered by Representatives McCollum, Bachus,
Barr and myself to sunset the Bretton Woods Act in three years
and call for the Treasury to report on alternatives in two
years is the first, responsible step that must be taken. The
IMF has outlived whatever justification it might have had; it
has no place in the new era of floating exchange rates.
A defeat of the IMF appropriations by the United States
will be a very positive step in the direction of tackling the
very serious problem which must be addressed. That is,
promoting a sound currency for the United States and settling
an example for the world. Only a gold or other commodity
standard of money can do this. Political, or paper money, can
only work for a short period of time and significantly enables
authoritarian governments.
Ron Paul.