WSJ. GOP Leaders Lays Out Proposal For $17.9 Billion in IMF Funds
October 9, 1998
By GREG HITT and BOB DAVIS
Staff Reporters of THE WALL STREET JOURNAL
WASHINGTON -- Congressional Republicans laid out what they
portrayed as a compromise that could clear the way for full U.S. funding
of the International Monetary Fund, but it's far from clear whether the
Clinton administration will agree to the terms.
Significantly, GOP leaders want to link $17.9 billion in new funds for the
IMF to certification that other major donors to the institution, not just the
U.S., are pursuing congressionally mandated changes. The proposal
emerged Thursday as Treasury Secretary Robert Rubin conferred with
Republicans on Capitol Hill. Among other things, GOP leaders are
insisting that the IMF cut back on subsidized lending and limit the length of
loans to one year.
"We've got a constructive suggestion," said Mr. Rubin, before retreating to
the White House to brief President Clinton.
Under the proposal, none of the new funds approved by Congress would
be released to the IMF until after the Treasury secretary and the Federal
Reserve chairman certify in writing that "the major shareholders of the fund
have publicly agreed to and will act to implement" the detailed package of
congressional changes.
"I thought the initial response was very encouraging," said House Majority
Leader Richard Armey (R., Texas).
Renewed Clinton Appeal
At the White House, Mr. Clinton renewed his pitch for approval of the
IMF funds, while his spokesman, Joe Lockhart, struck a cautionary note
about the talks on Capitol Hill. "We've heard some positive sounds over
the last few days about getting IMF," Mr. Lockhart said. But "we can't
allow a debate on reforms to hold up the important work that the IMF's
doing."
The administration, struggling with the global economic crisis, says the
funds are needed to ensure that the IMF is able to deal with problems in
Russia and Asia, and potentially South America. Of the $17.9 billion
requested by Mr. Clinton, $3.4 billion represents the U.S. contribution to
an international effort to double an existing IMF credit line to $48 billion.
The remaining $14.5 billion would be used to increase the IMF's core
capital.
The GOP's proposed conditions are outlined in a 35-page legislative
package pieced together over the past several days in meetings
coordinated by Speaker Newt Gingrich (R., Ga.). The document reflects
midlevel discussions that have already taken place between Treasury
officials and GOP staffers, but at its core is a proposal that bows to the
Republican Party's influential conservative wing.
Elements of the Plan
Among other things, the GOP proposal would:
Require the fund to charge much higher interest rates, perhaps twice
as much as traditionally charged. The proposal would require the
rates to be at least three percentage points above the monthly
London Interbank Borrowing Rate, or Libor, an internationally
recognized benchmark for bank lending. The Libor rate Wednesday
was 5.37%.
In a new program for short-term lending that the fund approved in
December at the behest of the U.S., the maximum rate is five
percentage points over the IMF's traditional rate-meaning about
9%. But the rates under that new program would only reach that
point after a number of years.
Require loans for countries in severe distress, suffering "exceptional
balance of payments difficulties due to ... a sudden and disruptive
loss of market confidence," to be made in shorter maturities and at
higher interest rates, providing "an incentive for early repayment and
encouraging private-market financing."
Create a special commission to study all international financial
institutions, not just the IMF, and recommend long-term reforms.
The commission, among other things, would examine "possible
mergers or abolition" of existing institutions.
Such advisory committees are a staple of trade agreements. The North
American Free Trade Agreement, for example, has a passel.
However, the GOP's proposal to hinge the new U.S. funds on the support
of the rest of the Group of Seven industrial powers could be difficult for
Mr. Rubin, since it would require the coordination of Britain, France,
Germany, Italy, Canada and Japan. The French, in particular, are often
resentful of U.S. shows of power and have taken delight in wrecking
Clinton administration proposals -- particularly in holding up the world
trade talks for years and torpedoing a 1994 U.S. proposal for a new
round of trade negotiations.
The IMF negotiations, which convened in Mr. Gingrich's office minutes
after House approval of a presidential impeachment inquiry, are part of
broader talks between Congress and the White House over spending in
the new fiscal year.
Government funding expires midnight tonight, and GOP leaders are
expected to send Mr. Clinton a bill that would avoid an interruption in
services over the weekend. Some leaders cited concern about shuttering
the popular Van Gogh exhibit at the National Gallery of Art. "Have you
been there? It's excellent," said House Republican Gerald Solomon of
New York.
Congress is inching closer to recessing for the year, and the pace of
legislation and lobbying is quickening alongside budget negotiations.
Lobbyist Beryl Anthony, a former congressman, is pressing lawmakers to
soften a proposed tax increase that would hit First Chicago NBD Corp.'s
First National Bank of Chicago unit, a client, congressional aides said. The
Senate Thursday sent Mr. Clinton a $93.5 billion bill funding the
departments of Housing and Urban Development and Veterans Affairs,
while GOP leaders tried to break free a bill that would ensure several
thousand legal immigrants won't lose Medicaid and Supplemental Security
Income benefits later this year.
Lawmakers also were moving to soften cuts in payments to Medicare
home health agencies enacted last year. The agencies say the reductions
are draconian and have forced some outfits to shut down.
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