Fischer and Soros on IMF's future role

[Robert Weissman <rob@essential.org>]

IMF leader says bank should be lender of last
resort                      
Date: Sun Jan 03 16:51:54 CST 1999

   NEW YORK, Jan 3 (AFP) - The number two at the International Monetary
Fund (IMF) on Sunday recommended that the organization expand its role
as a lender of last resort.
   Speaking at a joint luncheon of the American Economic Association and
the American Finance Association, Stanley Fischer said the IMF could
take steps in that direction by inviting "private sector involvement in
the solution of financial crises."
   Fischer, the IMF's first deputy managing director, cited the approach
taken by nations such as Argentina that have established "precautionary
lines of credit from private sector lenders."
   "This is a useful supplement to the holding of reserves, and could
possibly be cheaper than increasing reserves," Fischer said, noting that
he was expressing his views and not those of the IMF.
   Fischer also said that the IMF's Executive Board had agreed it could
"lend to countries in arrears to private creditors, provided they are
pursuing appropriate policies and making good faith efforts to cooperate
with the creditors."
   He added that requiring banks or creditors to share in the financing
of IMF programs "would be destabilizing for the international system."
   "If such a condition were insisted on, the creditors would have a
greater incentive to rush for the exits at the mere hint of a crisis,"
he said.
   Crises over the last five years have revealed major flaws in the
structure of the interna-tional economy, Fischer said, and economic
leaders must now urgently consider solutions such as "the further
development of the role of the international lender of last resort."
 
 
Report: Soros Urges IMF
Changes                                             
Date: Sun Jan 03 20:32:55 CST 1999

        LONDON (AP) -- The International Monetary Fund should be
transformed into a global central bank to help prevent new financial
crises from wrecking economies around the world, American financier
George Soros said Monday in the London-based Financial Times.
        ``Markets can move like a wrecking ball, knocking over one
economy after another,'' Soros said in an op-ed article. ``The swings
cannot be avoided altogether, but they need to be brought under
control.''
        Changes to the IMF were necessary because it had become ``part
of the problem rather than the solution.'' But he strongly disagreed
with those calling for the IMF's abolition. 
        ``If global financial markets are inherently unstable we need a
stronger regulatory framework rather than the dismantling of existing
institutions,'' Soros wrote. ``To be specific, we need to convert the
IMF into something resembling an international central
bank.''
        Soros said the IMF should act as lender of last resort, and only
for ``a select group of countries that are eager to obtain such
protection.''
        In return, the countries would have to maintain sound economic
and banking policies. Countries which failed to meet those conditions
would continue to have access to the IMF on terms similar to those which
currently are available. But in a crisis, the IMF would be allowed to
impose conditions not only on the country involved but also on the
creditors.
        Soros said that would eliminate the ``current imbalance in favor
of creditors.''
        One of the major criticisms of the billion-dollar IMF rescue
packages for Asia and Russia in the past year was that much of the money
went to bail out international bankers who made bad investments.
        Soros, chairman of Soros Fund Management, runs the $20 billion
Quantum group of hedge funds, which were rattled by the turbulent global
economy last year.
-=-=-

Soros wants IMF as international central
bank                               
Date: Mon Jan 04 07:22:33 CST 1999

   LONDON, Jan 4 (AFP) - US financier George Soros called Monday for the
IMF to be turned into an international central bank to prevent financial
crises, in an article for Britain's Financial Times.
   He said the International Monetary Fund (IMF) had been part of the
problem in recent crises rather than the solution because of "punitive"
conditions it imposed on debtor countries. 
   The answer, he wrote, was that "we need to convert the IMF into
something resembling an international central bank." 
   "I am talking about empowering the IMF to act as lender of last
resort with regard to a select group of countries that are eager to
obtain such protection."
   In the past, the IMF imposed "punitively high" interest rates on
debtors, while at the same time lenders relied on the organisation to
bail them out in case of trouble.
   Also, the IMF could only intervene in times of difficulty rather than
try to prevent a crisis developing, he said.
   Under Soros' proposal, the IMF would impose conditions not only on
the country concerned but also on creditors, and regulate the
environment for international capital flows.
   "The new arrangement would also eliminate the imbalance between
prevention and cure. The emphasis would be on prevention," he added.
   Institutions such as US the Federal Reserve and new European Central
Bank would be represented on the governing body of such an organisation.