Date: 1983-03-17
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Speaker. as you know. the House Banking Committee recently completed 4 days of hearings on the international lending problem. the U.S. economy. and the IMF quota increase. At those hearings. we heard the testimony of Treasury Secretary Donald Regan. Federal Reserve Chairman Paul Volcker. representatives of Citibank. Chase Manhattan Bank. and Bank of America. and numerous experts on economics and international banking. We also recently completed 2 days of hearings on the rising trend of mortgage foreclosures in the United States. The testimony of hardworking men and women who had never been unemployed in their lives until this recession and who have lost or are about to lose their homes or farms through foreclosure had a profound impact on me and my committee colleagues. The committee acted promptly and passed H.R. 1983. the Emergency Housing Assistance Act. which will be considered by the House next week. Admittedly there are signs of improvement in the American economy. but from what I am hearing about unemployment. forced home and farm sales. small business bankruptcies and the like. our economy is a laong way from being what it could and should be. From all that I heard in those many days of hearings. four facts became clear to me. First. our primary concern has to be for the wellbeing of citizens in our country. Second. if there is going to be any hope at all of solving the international debt problem. we clearly need to have a strong and sustained recovery here in the United States and in the other industrialized nations of the world. Third. the large American money center banks did not exercise the judgment they should have in their foreign lending activities. and ultimately significant international bank regulatory reform will be needed if we are to avoid similar situations in the future. And fourth. increasing the U.S. commitment to the International Monetary Fund is an essential element in maintaining world economic stability. and because the U.S. economy is critically dependent on world economic growth and prosperity. the increase will enhance the economic outlook for the United States. One of the major obstacles to a sustained recovery is the potential for another flipflop by the Federal Reserve Board excessively concerned about inflation and forcing interest rates back up. A return to the high rate policies of the first 2 years of the Reagan administration is a prescription for disaster. We must not. allow the Federal Reserve to shift once more. For the sake of our own domestic economy and for the economic wellbeing of the world. it is imperative that we implement monetary and fiscal policies that will bring about interest rate reductions and a return of sound economic growth. Another potential obstacle to a strong recovery is the mounting international debt crisis. Many developing countries are faced with debt payments that they cannot afford. due to the worldwide recession. and high interest rates. In fact. some of these struggling nations are actually unable to afford even the interest payments on their debts. The danger of a default snowballing into international financial disaster grows each day. To free up resources in the developing nations for growth. we must begin discussions toward a multilateral plan to stretchout foreign debt for developing nations. We have a golden opportunity to express our commitment to a strong and growing domestic economy and a restoration of global economic growth. In late May. representatives of the largest industrial nations in the world will gather for an economic summit in Williamsburg. Va. Mr. Speaker. I strongly urge that the United States should not repeat the Toronto mistake of having no agenda and refusing to acknowledge our problems. but instead we should use the Williamsburg summit to announce our commitment to lower interest rates. lower deficits. and a strong recovery around the world. In addition. I urge that we take whatever actions are necessary to assure that the agenda of the economic summit includes consideration of multilateral agreements to extend the maturity of the foreign debt of the developing nations and to correct the deficiencies which now exist in the regulation and supervision of international banking. To assure that this opportunity is not missed. Mr. Speaker. I am introducing the international recovery resolution. a House joint resolution. expressing the sense of the House that the United States should use the upcoming economic summit to make clear its willingness to pursue monetary and fiscal policies and take those international financial actions which will contribute to world economic recovery. Mr. Speaker. action on the international recovery resolution is needed because for many nations. shortterm loans. lasting only a few years. are a convenient fiction. Neither the banks nor the nations believe that the loans will ever be repaid. Instead. the loans will be rescheduled when the payments come due. For banks this is convenient. since they collect large sums of cash up front as rescheduling fees. and then continue to pretend that their loans will be paid. Meanwhile. debtor nations find themselves borrowing more money simply to make the interest payments on previous loans. I am fearful that this may prove to be simply a giant. international Ponzi scheme. an international house of cards that must collapse of its own weight. Sooner or later. rationally or in a panic. we must face facts. The developing country debt problem is serious. and getting worse. As nations borrow to make interest payments on earlier loans. the problem simply spirals. Recent declines in oil prices will hurry this process as OPEC nations pull their liquid investments out of western nations. and retrench on lending to their nonoil exporting neighbors. Fortunately. there is still time for a rational appraisal of this debt probleri. There is still time for negotiations toward a multilateral stretchout of the existing loans. By converting them to more manageable longterm debt. there is a good chance they can be repaid. But that process must begin soon. and the Williamsburg summit in May is the right place at the right time. We cannot let this opportunity slip by. If a few nations defaulted. there would be increased pressure for banks to pad their bad debt reserves further. and force rates even higher. Higher rates could force other countries into default as their payments increased. The upward spiral of rates. and downward spiral of international solvency has. only one end: an international depression. The keys to preventing this disasterous chain of events are low interest rates and a rational reordering of developing nations debt. Lower U.S. interest rates will reduce payment for debtor nations as the dollar falls from its overpriced level on international markets. But lower interest rates will only come from a monetary policy that allows a strong recovery. and from tax and spending changes that reduce budget deficits. in the future. The United States should clearly announce that we are ready to lead the way to a worldwide recovery. The time for retrenchment. high interest rates and recession is past. This message would reassure our 11 million unemployed citizens. and would be a great relief to the millions of unemployed people across the world for whom recovery means jobs. adequate food. and renewed dignity. The international recovery resolution will put the Congress firmly on record in favor of recovery policies by our Nation and other developed countries. It will help assure that the most urgent problem of international debt rescheduling is discussed at the nearest appropriate international meetingthe Williamsburg summit. Finally. it will send a strong signal to our constituents. and to our allies that the United States is ready to assume its rightful mantle of leadership in these troubled economic times. H.J. Res. 208 Whereas the economic wellbeing of all Americans depends on world economic growth and prosperity. Whereas millions of American jobs have been lost through worldwide recession. and 35 per centum of our GNP decline in the 198182 recession was due to a sharp drop in exports. Whereas world economic recovery is being retarded by high United States interest rates. and by the overwhelming magnitude and short maturity of the developing nations foreign debt. Whereas if the time allowed for developing nations to repay their debts were lengthened. the international debt crisis would be substantially eased. and financial resources within these countries could be turned to expanding growth. Whereas expanded growth of developing countries will help to restore Ameritan export markets lost in the worldwide recession. and bring back millions of American jobs. Whereas bank regulation in individual nations which was designed to meet internal. rather than international needs. lacks uniformity from nation to nation. and may have contributed significantly to the current international debt crisis: Now. therefore. be it Resolved by the Senate and House of Representatives of the United States of America in Congress assembled. That it is the sense of the Congress of the United States that the United States should use the upcoming economic summit meetings in Williamsburg. Virginia. to indicate its willingness to pursue monetary and fiscal policies necessary to stimulate growth in this country. and to help lead a world economic recovery by taking such actions as are necessary to assure that the agenda of the economic summit meetings will include: (1) considera. tion of a multilateral agreement to adopt national fiscal and monetary policies designed to bring about a prompt reduction in worldwide unemployment. and interest rates. (2) inauguration of a plan to extend the maturity of foreign debt owed by developing nations. and (3) commitment to correct any lack of uniformity or deficiencies which now exist in the regulation and supervision of international banking.e