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To: Steve Fancy who wrote (8406)	9/22/1998 2:27:00 PM
From: DMaA	Respond to of 22640

World politicians seem to be stirring into action. Not sure if that is good. Tony Blair calls for complete overhaul of IMF. The Wall Street Journal Interactive Edition -- September 22, 1998 Tony Blair Calls for IMF Reform To Ease Global Financial Crisis By MICHAEL M. PHILLIPS Staff Reporter of THE WALL STREET JOURNAL WASHINGTON -- With the Asian crisis spreading around the globe, British Prime Minster Tony Blair added his voice Monday to the chorus demanding that some limits be placed on the freewheeling nature of 1990s global capitalism. Speaking at the very heart of the world financial system -- the New York Stock Exchange -- Mr. Blair called for a one-year multilateral effort to reform the global financial system to prevent the kind of currency crisis that has swept through Asia and Russia and is threatening to absorb Brazil. "The current crisis illustrates the weaknesses of the existing international financial system," Mr. Blair said. "It needs to be modernized to meet the challenges of a new century." His comments added to the growing consensus that something must be done to insulate developing nations from financial volatility, the dark side of the international-capital flows that have flooded emerging markets the past decade. In a speech at New York University Monday, President Clinton concurred: "The most urgent thing we can do is to find a way to keep capital flowing freely so that the market system works around the world, but do it in a way that prevents these catastrophic developments." Cross-border financial flows have been encouraged by the International Monetary Fund, the U.S. and other major industrialized nations, which have urged developing countries to open their borders to foreign investors. Developing nations have considered the inflows a welcome way to jump-start growth and create jobs. However, the nations feel differently about sudden capital outflows, such as those that appeared since the devaluation of the Thai baht and signaled the start of the Asia crisis last July. Increasingly, that skeptical view is being shared -- at least to some degree -- by policy makers in the U.S., the U.K. and many other nations, which are reconsidering the wisdom of the rapid liberalization of capital movements. "The gung-ho world capitalism which was evolving will no longer be the order of the day," predicted Columbia University economist Jagdish Bhagwati. Extreme financial instability surfaced briefly during the Mexican peso crisis of 1994-95. That turmoil subsided quickly, and efforts to reform the global-financial system lost momentum. But the Asian crisis has brought them back to the forefront. The IMF released data Monday showing that net-private-capital flows to emerging markets fell to $173.7 billion in 1997 from $240.8 billion a year earlier -- a 28% drop that seems likely to have worsened this year. Net-private-capital flows to Asia measured just $13.9 billion in 1997, an 87% plunge from the $110.4 billion that poured into the region in 1996. Commercial lenders and portfolio investors actually took $44 billion more out of Asia last year than they put in. Policy makers such as U.S. Treasury Secretary Robert Rubin have long argued that emerging-market governments must adopt sound fiscal, monetary and regulatory reforms, the kind of policies that attract foreign investors. But this group also is seeking ways to protect developing nations from the capital flight that occurs when investors fear that if they sit tight, they will lose their money to a collapsing currency or other economic disaster. Even countries with relatively healthy economic policies can find themselves the victims of a panicky outflow of capital. "I do think it's quite possible that substantial changes need to be made" to the financial system, Mr. Rubin said in an interview Monday. The problem is that nobody has a clear idea of what changes are necessary or how to implement them. "It's very easy to throw ideas out on the table, and it's an important thing to do," Mr. Rubin said. "But the key is then to analyze them with the seriousness that will enable judgments to be made about all the possible ramifications and how this might work. And I don't think that any of this is perfectly understood." Mr. Rubin said economists have learned an enormous amount during the course of the Asian crisis. A group of 22 developing and industrialized nations has been preparing reports on several areas of global-financial reform, including how to ensure that international bailouts, such as those in place for many Asian countries, don't simply rescue Western investors while imposing severe economic hardship on the populace of poor countries. The 22 nations will meet in Washington on Oct. 5 to discuss its findings. In the meantime, academics and policy makers alike are tossing out suggestions. "We should not be afraid to think radically and fundamentally," Mr. Blair said. He identified five steps: Encouraging countries to be more open with economic information, allowing foreign investors to make a more-reasoned estimate of the risks. Insisting that the IMF and World Bank devote more energy to bank supervision and regulation in developing nations. Ensuring that the IMF has sufficient funds to help deserving nations -- at least those that adhere to sound policies -- survive when global financial panic leaves them strapped. Demanding greater openness and accountability by the international financial institutions themselves. Reconsidering policies that urge emerging markets to adopt a rapid and full liberalization of capital accounts. "The recent sharp movements in global capital flows have provided a stark demonstration that while open capital markets do bring in substantial benefits, they also pose serious challenges," Mr. Blair said.

To: Steve Fancy who wrote (8406)	9/22/1998 2:34:00 PM
From: DMaA	Respond to of 22640

Another story, same subject: BRITAIN'S BLAIR CALLS FOR RADICAL REFORM AT IMF, WORLD BANK LONDON-(Dow Jones)- British Prime Minister Tony Blair on Monday called for an overhaul of international financial institutions such as the World Bank and the International Monetary Fund. Rapid reform of these bodies is essential to enable them to respond to financial crises such as those in Asia and Russia in the last year, he said in a text for delivery to the New York Stock Exchange later Monday. "This is not a matter of a few technical changes," said Blair. "We should not be afraid to think radically and fundamentally. We need to commit ourselves today to build a new Bretton Woods for the next millennium." Bretton Woods, N.H., was the site of the conference at which the World Bank and the IMF were founded 54 years ago. Blair set a deadline of one year to come up with reforms to these institutions. Echoing Chancellor of the Exchequer Gordon Brown, Blair called for greater openness and transparency in the international financial system, with international codes of conduct on monetary and fiscal policy as well as corporate governance and international accounting standards. "I have no doubt that promoting greater accountability and openness will strengthen the incentives on governments to pursue sound policies, will enable markets to price risk more accurately and should help all countries to manage more effectively the risks of global integration," he said. Blair said the 54-year-old institutions "were constructed for a world of fixed exchange rates and capital controls, when international capital flows were much smaller." Blair called for improvements in international financial supervision and regulation, adding that the IMF and the World Bank need to give this issue a much higher priority and work more closely together as well as with the main international regulatory organizations. Global investors need to assess more carefully the risks associated with their lending decisions and price their loans appropriately, said Blair, adding: "We need new mechanisms to ensure close and regular contact between governments and the private sector that can provide early warning of problems." The World Bank and the IMF themselves need to be more transparent and open, Blair added. "More discussion of their programs and explanation of their advice will help to build a public consensus behind reform." He said finance ministers and central-bank governors from the Group of Seven leading industrial nations should take these issues forward "as a matter of urgency" when they meet in Washington next month and that firm proposals should be set before G-7 leaders at their summit next year. Earlier, the overseas edition of the British newspaper the Financial Times reported that Blair, currently G-7 chairman, will call for a partial merger of the IMF and World Bank. Blair also will suggest there may be a need for major private-sector funds, such as those controlled by financier George Soros, to publish details of their exposures to individual economies, the business newspaper said, quoting Blair's spokesman. Blair said he will meet with Japanese Prime Minister Keizo Obuchi later Monday and will welcome "the efforts that have been made toward resolving the major problems in Japan's banking sector". He added that "swift and strong fiscal action" to boost domestic demand in Japan and further measures to strengthen that country's financial system "would provide the biggest single boost to investors' confidence in Asia and beyond". On Friday, after a month of talks, Japan's ruling Liberal Democratic Party and the opposition announced a "basic agreement" under which insolvent banks would be liquidated or placed temporarily under state control and a new body would use public money to buy up bad loans. But on Sunday it became clear that the parties were still far from a substantial accord and that the pact was merely a failed attempt to create the appearance of consensus when Obuchi meets President Clinton in New York on Tuesday. Japan's banks have racked up at least $600 billion in bad loans this decade and now must dispose of those obligations.