U.S. defends efforts to solve SE Asian crisis

U.S. defends efforts to solve SE Asian crisis

WASHINGTON (Reuters): U.S. monetary officials defended their efforts to help Asia's troubled tiger economies on Thursday, while lawmakers rejected a request for extra funding for the International Monetary Fund.

U.S. Federal Reserve Chairman Alan Greenspan and Deputy Treasury Secretary Lawrence Summers told the Banking Committee of the House of Representatives that temporary help for the once- booming tigers was in the best interests of the United States.

But aid should be channeled through the IMF, which could set the conditions needed to encourage the right sort of policy change, they added.

"The IMF must remain at the heart of any international response," Summers told the committee, which was examining Asia's financial troubles. "We must ensure that the IMF has the means to act promptly and effectively."

Even as Summers and Greenspan spoke, Congress was passing a $13 billion foreign aid bill that excluded an administration request for $3.5 billion for the IMF.

The money would have formed the U.S. share of the IMF's New Arrangements to Borrow (NAB) -- which provide funds to deal with what the IMF describes as financial emergencies.

The IMF already has engineered multi-billion dollar international bailouts for Thailand and Indonesia, and many economists expect South Korea to seek help soon. "Korea is the next crisis candidate," U.S. economist Fred Bergsten said in remarks prepared for the committee.

Bergsten, a former economic adviser to the White House, criticized Congress for excluding the IMF funding from the foreign aid bill and declining to grant fast-track trade negotiation authority to President Bill Clinton. "While the world burns, Congress is fiddling," he told reporters.

The South Koreans have denied they will turn to the IMF, and IMF officials say they know nothing of any request.

Greenspan said it was important not to give the impression that the international community was ready to guarantee the liabilities of governments or companies, but he added:

"It is in the interests of the United States and other nations around the world to encourage appropriate policy adjustments and, where required, provide temporary financial assistance," he said.

The United States, which put together a $50 billion international package for Mexico in 1995, has offered Indonesia $3 billion in its bailout -- to the disgust of lawmakers concerned about military spending, human rights abuses and nepotism.

"These efforts are not motivated by charity. They have been motivated by our concern in American interests and in a strong American economy," Summers said.

He added: "Our participation reflected our concerns about the risk of further contagion, our desire to join a number of other countries in showing support for the program and our desire that it should succeed."

Summers said the problems in Indonesia were different from those in Mexico, which had been "within a small number of days of possible default" in 1995. This was not the case in Southeast Asia.