Focusing on the Currency Crisis

The international financial crisis now has the full attention of the White House.

For some weeks, Treasury Secretary Robert Rubin and his deputy, Lawrence Summers, have reportedly urged President Clinton to get more involved in the spreading disaster.

But Mr. Clinton was swamped by his personal scandal. Now that the Starr report is public, the president is devoting more time to another mess - emerging-nation troubles that threaten US prosperity.

Most American economists don't expect a recession in the United States. But many have been growing more cautious about the prospects for growth.

Similarly, the International Monetary Fund has just cut its estimate of world growth this year to 2 percent. A year ago, the Washington-based multilateral body projected 1998 gains at 4.25 percent.

To keep the world economy on an upward path, many on Wall Street now urge a coordinated cut in interest rates by the major industrial nations.

At least for the moment, that's out, according to both Federal Reserve Chairman Alan Greenspan and Hans Tietmeyer, president of Germany's central bank.

More trouble in the world economy could change these positions. And the Fed may act alone in cutting US rates.

The administration clearly favors such a move. The White House has long avoided offering public advice to the Fed, so no official favors a rate cut out loud. Such advice could prompt the Fed to delay action to emphasize their independence.

Asked at a congressional hearing last Wednesday whether he would like to say anything on interest rates, Secretary Rubin replied, "Not particularly." The room broke into laughter. Most there undoubtedly figured he would love to see rates down.

A week ago President Clinton told the Council on Foreign Relations in New York: "The industrial world's chief priority today plainly is to spur growth."

A key way to do that is to lower interest rates.

With the international crisis in mind, some prominent academics have been calling on Washington to push for changes in the international monetary system.

So have some in Congress.

"This is the greatest financial crisis in my lifetime," Rep. Paul Kanjorski (D) of Pennsylvania, told the Banking Committee hearings of the international currency crisis. "We are sitting here almost fiddling."

Reform of the system has now become a Clinton theme. "Above all, we must accelerate the efforts to reform the international financial system," he said in New York. He called for Rubin and Greenspan to call a meeting of "their counterparts within 30 days to recommend ways to adapt the international financial architecture to the 21st century. "

The two officials echoed that position in their testimony to Congress.

Mr. Greenspan assured committee members that "a fundamental restructuring is needed" of the international monetary system.

One goal of such talk is to persuade the House to pass $18 billion in new funding for the IMF. The administration wonders whether the IMF will have enough funds available to stanch another crisis should one break out in Brazil or elsewhere.

Clinton called for using $15 billion in IMF emergency funds to help stop more trouble.

C. Fred Bergsten, director of the Institute of International Economics, suspects the president's "moral authority" may have been eroded.

"The president may not be able to deliver too much," he says. "It depends on how the scandals come out."

Last week, the world's 295 largest private financial institutions, with trillions of dollars in assets, chimed in.

Represented by the Institute of International Finance in Washington, they asked for a voice in reform discussions. They want to avoid controls on international flows of capital, to have investors recognize the huge differences between emerging nations, and to discourage debt moratoriums, such as that of Russia.