Magazine article American Banker

Treasury Secretary Says Rescue Package for Asia Is Not a Bank Bailout

Magazine article American Banker

Treasury Secretary Says Rescue Package for Asia Is Not a Bank Bailout

Article excerpt

A rescue package for Asian economies should not be used to shield banks from losses in those markets, Treasury Secretary Robert E. Rubin told lawmakers Friday.

"Investors and creditors should bear the full consequences of their actions," he said at a House Banking Committee hearing. "I would not spend one nickel for the purpose of protecting investors or banks."

Mr. Rubin's comments were meant to build support among lawmakers for the Clinton administration's $18.5 billion request for the International Monetary Fund. Some lawmakers have complained that the administration's plan would bail out banks that made risky loans.

Mr. Rubin noted that several large banks, including J.P. Morgan, Chase Manhattan, and Citibank, have already absorbed large losses because of sour Asian investments.

House Banking Committee Chairman Jim Leach, who has sponsored legislation backing the IMF funding, echoed Mr. Rubin's comments.

"It is not the IMF's role to bail out banks," Rep. Leach said. "Banks must take hits on their banking misjudgements."

Mr. Rubin conceded, however, that the administration's plan would stem additional bank losses by shoring up Asia's turbulent economies. "It is true that a byproduct of programs designed to restore stability and growth may be that some creditors will be protected," he said.

But the American economy will suffer if Congress blocks the administration's plan simply to impose additional punishment on banks, Mr. Rubin told lawmakers.

"It could cause banks to pull back from other emerging markets, which could cause serious global economic disruptions, including in our own economy. …

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