Newspaper article The Christian Science Monitor

The IMF - a Bargain

Newspaper article The Christian Science Monitor

The IMF - a Bargain

Article excerpt

Like the hero in an old movie, the International Monetary Fund will soon be riding to the rescue of a fair damsel, Indonesia. It will bring nearly $1 billion in loans to help the nation get its economy back on track after weeks of disorder that pushed President Suharto from office.

The IMF also will be showing its key shareholders, the industrial nations, its usefulness. It will insist on reforms, such as those needed in Indonesia's financial system. The IMF's role as an intermediary will be vital. It would be politically difficult for, say, the United States directly to demand such changes from a proud nation.

Indonesia illustrates the ideological recklessness of many attacks on the IMF. Some conservatives seem to so worship the free market that they are willing to gamble that a financial crisis will be only half-attended by the IMF. It will thus lack the resources to shore up the finances of troubled nations and prevent the crisis from spreading. That prospect seems not to bother some IMF critics. "IMF bailouts are a form of insurance for the foreign and domestic individuals, firms, and banks that had made high-risk investments," says Cato Institute chairman William Niskanen. Private bankers "are likely to handle such problems better than do public officials who play this game with other people's money." Mr. Niskanen, a former adviser to President Reagan, uses the word "likely." We're not even that sure. Private banks do have a role, but if one follows that argument to its extreme, the Federal Reserve and the Federal Deposit Insurance Corporation should be abolished. Let private markets decide the fate of US commercial banks. Ignore the possibility of depositor runs on a bank; consumers will soon learn to trust only gold-plated banks. Sure, some depositors will be hurt. But they'll learn. …

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