Confidence in Asia shattered: Greenspan<\/p>\n
WASHINGTON (Reuters): U.S. Federal Reserve Chairman Alan
\nGreenspan offered a bleak assessment on Friday of the financial
\ncrisis gripping Asia, saying bank runs had reached crisis
\nproportions in Indonesia and confidence was shattered.<\/p>\n
"In an environment of weak financial systems, lax supervisory
\nregimes and vague guarantees about depositor or creditor
\nprotections, bank runs have occurred in several countries and
\nreached crisis proportions in Indonesia," Greenspan told a
\nFederal Reserve Bank of Atlanta conference in Miami Beach,
\nFlorida.<\/p>\n
"Uncertainty and retrenchment have escalated. The state of
\nconfidence so necessary to the functioning of any economy has
\nbeen torn asunder," he said. "Some exchange rates have fallen to
\nlevels that are understandable only in the context of a veritable
\ncollapse of confidence in the functioning of an economy."<\/p>\n
Asia's economic crisis has so disturbed the Clinton
\nadministration that it has decided to send its second envoy to
\nthe region in as many months.<\/p>\n
Former U.S. Vice President Walter Mondale is visiting
\nIndonesia to discuss the need for political and economic reforms.
\nCollapsing currencies in Asia were rooted on a "visceral,
\nengulfing fear" rather than a rational reaction to sharp declines
\nin the state of economies, Greenspan said.<\/p>\n
While stressing the seriousness of the problems facing Asia,
\nGreenspan held out hope of recovery if its hardest-hit nations
\nreformed their ways and the international community continued to
\noffer support.<\/p>\n
"Eventually, the Asian economies now suffering from the
\ncurrent crisis will recover," Greenspan said. "If the proper
\npolicies are pursued and there is support from the international
\ncommunity, the process of recovery can begin soon and the
\nstructural reforms necessary for more durable growth will be
\nunder way."<\/p>\n
Without specifically mentioning the International Monetary
\nFund, Greenspan said institutions working to contain Asia's
\nfinancial crisis should be supported.<\/p>\n
The Clinton administration has asked Congress to approve about
\n$18 billion in additional funds for the IMF to replenish
\nresources drained by 1997's multibillion-dollar bailouts for
\nIndonesia, South Korea and Thailand.<\/p>\n
Greenspan also said the global financial system was in need of
\nreform.<\/p>\n
"I believe that what is being referred to as the architecture
\nof the international financial system will need to be thoroughly
\nreviewed and altered as necessary to fit the needs of the new
\nglobal environment," Greenspan said.<\/p>",
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