Date: 1983-07-26
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Chairman. financial resources. at this time I would like to speak in support of the amendment offered by This concern on my part Is not a new the gentleman from New York. my dis- one. In my Williamsburg resolution. tinguished colleague. CHARLES which formed the basis of title 11 of SCHUMER. H.R. 2957. I urged the governments of As I said yesterday. no shortcuts the Industrialized nations to take cowere taken in the Banking Commit- ordinated actions to reduce the finantees consideration of H.R. 2957. This cial pressures on the developing counlegislation is the result of thorough tries so they would be able to regain subcommittee and full committee their political stability and grow cohearings and a tough amendatory nomlcally. A major reason for my inprocess. In fact. during committee sistance on the strong loan writedown markup. an earlier version of Mr. reserve provision in section 404. is also SCHUMERs amendment was defeated. related to reducing the debt burdens Since that markup almost a month on borrower nations. and a half ago. the gentleman from In my judgment. a major cause of New York has sought and obtained the present international debt probthe advice and counsel of the best lem is the tendency of banks to Impose minds in international finance and unrealistic loan repayment schedules economics. consulted widely with his on developing nations. As a conseHouse colleagues. and made important quence. international credit markets revisions in his amendment. In its are continuously buffeted by the unpresent form. the gentlemans amend- certainties of risky debt resehedulings. ment should be accepted wholeheart- and the borrowing nations are reedly by this House. Let me explain quired to pay enormous rescheduling why. fees on top of quite high interest During general debate on this legis- rates. While such fees add to bank lation yesterday. Mr. SCHUMER and I profits. they also drain these nations discussed the nature and importance of financial resources desperately of IMF adjustment programs. Our needed to enable them to accommoconclusion was simplewithout an date the drastic changes the IMF and IMF adjustment program to enable a the present situation imposes on them. borrowing nation to rectify its ft- The special reserve provision. partieunances over time. it would have to go larly section 404(a)(2). would encourinto total and immediate default. The age banks to make loans which are reconsequences of such an event on the alistic and do not have to be resehedeconomic. social. and political fabric of uled and refinanced with new. larver a borrower nation would be devastat- borrowings. To me It is absolutely ing. All trade finance would halt. un- clear that if bank lenders fail to adopt employment would soar. indescribable a realistic outlook on the repayment economic hardship would spread abilities of the developing nations. the throughout the Nation accompanied result in these nations will be political. with social unrest and violent political social. and economic injury of historic disruptions. No mention need be made proportions of the effects of public and private The Schumer amendment addresses lending institutions. My colleague these concerns by requiring the U.S. from New York and I agreed that as executive director to work to get the painful as IMF adjustment programs are. they are better for borrowers and lenders alike than not having an IMF courage not Just U.S. banks. but lendat all. and for this reason the IMFs Ing institutions around the world. to resources must be increased. increase the maturity of their loans I also pointed out yesterday that and reduce interest rates to levels this legislation has required sacrifice which the countries can afford to pay. and compromise by all parties involved The Federal Reserve has suggested with It. It has and will continue to re- that such an amendment will stimuquire a statesmanlike acceptance of late a wave of stretchout efforts by change by all concerned including the borrowing nationi. Unfortunately. this borrowing nations. the banks. and the Is already happening. Countries are IMF itself. looking at the example Argentina set The IMFs adjustment programs are last year when it unilaterally better than outright default. but they stretched out billions of dollars in are by no means perfect. As has been loans. These actions are being considpointed out by Member after Member ered. however. without the overall in the debates on H.R. 2957 at every controlling leadership of the IMF. level of its consideration. IMF pro- What Mr. Schumers amendment will Hl 5581 do is stabilize this process in a most constructive way. To the question of whether Mr. Schumers amendment will make banks change their foreign lending practices. the answer is "yes." Will this amendment make the IMF change its adjustment program pollcies? Yes. Are these changes the kind that must take place if our international financial problems are to be resolved? In my judgment. the answer is again a resounding "yes." and I ask you to join me in making this amendment a part of the International Recovery and Financial Stability Act. Mr. Chairman. I have just received a communique that I want to share with Members of the House. It is addressed to me from the Deputy Secretary of the Treasury dated July 26: DEAR MR. CHAIRMAN: On behalf of Secreta y Riegan. I wanted to send you this letter that was received today from the Public Securities Association. It is the premier group of bond dealers who make the primary market in government securities. As you will see. it expresses their concern as to f1le adverse impact on interest ratesAnd that would apply to the small businessmen of this country as wellif the louse of Representatives fails to pass the authorization for the United States increase in the International Monetary Fund. You may wish to use it in ihe debate this aIllii0oo01. 131.st )tirsonal regards. It. T. McNAMAR. I repeat I am going to read the letter to you. ladies and gentleman. but I repeat the words. it is "As you will see it expresses their concern as to the adverse impact on interest rates" In this Nation to each and every small businesnan. each and every potential home purchaser in this country. The letter reads as follows: "Dear Secretary Regan: As investment bankers." and believe me investment bankers are not bankers. As chairman of the committee I have watched the fracases between them. they fight like cats and (logs and have been before my committee for years. DEAn SEcRETARy REGAN: As investment bankers charged with advising the Treasury DIepartiment on debt manageeinet. we are heartened at the signs of vigorous economic recovry in the United Statis. ani growing consiumer and buiness confidence. The Congress is now considering legislation which will have a vital impact on the managemient of the international debt problem. If this issue is not handled correctly. coonfidence could be seriously damaged and our economic recovery derailed. U nless they receive adequate flows of new financing. some key developing countries may be forced to default o- their outstanding loans. in writing off these loans. U.S. banks would lose capital. and U.S. banking regulations would then force them to cut back on their loans to all customers. both foreign and domestic. by a multiple of the foreign loan loss. This reduction in bank credit would raise U.S. interest rates and depress domestic spending and investment. Exactly what Paul Volckr told us before our committee when he appeared before us last weekWe believe that concern about the potential effects of the international debt aituation has already reduced confidence in financial markets and may be putting significant upward pressure on Interest rates. The IMP has a crucial role in encouraging troubled countries to come to grips with their economic problems In an orderly manner. and In creating the necessary conditions for the continued flows of private financing which are essential to managing the debt problems. However. the IMPs loanable resources are virtually exhausted. and prompt passage of the IMF legislation is essential if the IMF is to continue to play its central part. The continued health of the U.S. economy and the jobs of millions of Americans may depend on this. and we strongly support the proposed legislation to permit U.S. participation In the increase In IMF resources. With best wishes. Sincerely. Chairman. PSA Committee. 1983 PUBLIc SECURITIEs AssocIATION. Gov-