During the presidential campaign, President Bush and his economic
advisers criticized the Clinton administration for its intervention
in foreign financial crises, such as those in Asia, Russia, and
Now in office, Mr. Bush may adopt his predecessor's tactics.
"My guess is that a hands-off policy will not be sustained," says
Richard Cooper, an international economist at Harvard University, in
A catalyst for change could be the collapse of the Turkish lira
last month. So far this crisis hasn't seriously spread to other
"emerging" nations. It shows few signs of becoming a global
financial crisis, like those of the late 1990s.
And it's certainly no threat to the American economy, even though
Procter & Gamble lost some revenue in its operations in Turkey.
"There isn't that much they [Bush officials] have to do," notes
Jeffrey Frankel, another Harvard economist, and former adviser to
The International Monetary Fund is already on the job in Turkey.
It has assisted a year-old program of disinflation and economic
reform. It announced Dec. 6 a $7.5 billion emergency loan. But the
program was fragile in the wake of 30 years of steep inflation,
erratic growth, and corruption in Turkey.
Amid a public dispute between Prime Minister Bulent Ecevit and
President Ahmet Necdet Sezer, the nation's somewhat loose tie of its
lira to the euro collapsed Feb. 22. Turks and foreigners rushed
their money out of the country.
By now, the lira has been devalued 25 to 30 percent.
Only a few days before the crash, in an interview with the London
Financial Times, United States Treasury Secretary Paul O'Neill held
that the failure in recent years to stop crises from developing was
a failure to let markets operate freely. "Why do we have to
intervene? Especially, why do we have to intervene on a crisis
basis? [Crises] are great media fodder but they're not real hot for
But Mr. O'Neill, his seat barely warm at the Treasury, did not
rule out US involvement, either in coordinated intervention by the
US and other nations in currency markets or by leadership in IMF
And right after the lira collapse, O'Neill issued a brief
statement noting that Turkey is "an important [NATO] ally and good
friend" and that the US continues to back the IMF program for
reform in Turkey.
That program is financial intervention. …