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To: mike h who wrote (4254)	12/14/1997 6:34:00 PM
From: goldsnow	Respond to of 116836

>>The reason I ask is because Bill Seidman on CNBC said the IMF was broke and couldn't finance any more bailouts by themselves. >> IMF indeed must be not well, looking for "harsh" solutions. Not sure if IMF allowed to sell assets/gold After S. Korea, IMF Seeks New Loan Rules 08:12 a.m. Dec 14, 1997 Eastern By Janet Guttsman WASHINGTON (Reuters) - The International Monetary Fund will debate new ways Monday to help countries cope with financial crises sweeping Asia, after its record bailout for South Korea failed, so far, to rebuild shattered confidence. The planned new program of short-term loans is not a direct response to South Korea's woes. Money would probably be offered on shorter terms and at higher interest rates than traditional IMF lending, which is usually paid back over up to 10 years. Analysts said the plan would give troubled states more chances of winning large sums of money at short notice, but countries would have to pay for the privilege. ''They feel that with these crises of confidence, they need a lot of money to restore it,'' said Morris Goldstein of the Institute for International Economics. The program is a response to this year's turmoil on world financial markets, a downward spiral of currencies, shares and bonds which has hit emerging economies around the world. The IMF has stepped in with three multi-billion dollar rescue packages in the last four months, including a record bailout of almost $60 billion for South Korea. But markets have responded poorly to the South Korean bailout -- the won currency has fallen about 30 percent in the week since the program was agreed -- and many politicians there dismiss the deal as international interference. The scale and the scope of the rescue packages has also raised concern about what economists describe as moral hazard -- the fear that countries may follow reckless policies because they know someone will always bail them out. The new program is being discussed following a recommendation from deputy finance ministers who met in the Philippines capital Manila last month. A statement released after the Manila meeting had asked the IMF to examine a short-term financing mechanism and to reassess the way in which countries win access to IMF funding. The aim would be ''to help ensure that (IMF) resources can be mobilized on a scale sufficient to help restore market confidence'', the statement said. But Goldstein said it might be more appropriate to try to reduce the size of international rescue packages than to make countries pay more for the money they receive. ''Rather than using so much money, they might try to handle moral hazard in other ways, particularly through (debt) rescheduling and allowing large uninsured creditors to take a hit,'' he said. ''The question is do you really need $60 billion (as in the South Korean package), or would it have been better to have had $30 billion, even if some creditors might not be paid.'' Countries only receive IMF loans if they adopt policies agreed in negotiations with the fund, and bilateral elements of the international bailouts are also tied to the IMF package -- donor countries say their contributions will not be available if the IMF stops paying. The IMF experts now hope that higher interest rates will act as an extra incentive to look for as little assistance as possible and to pay back early. A $50 billion 1995 U.S.-sponsored rescue package for Mexico also used relatively high interest rates, and Washington made a tidy profit on the deal. Copyright 1997 Reuters Limited. All rights reserved.