Clinton Faces Tough Battle to Bail Out Asia

WASHINGTON â€”  President Clinton is facing the prospect of another humiliating defeat in Congress next month on international economics, this time over using federal tax dollars to help bail out Asian countries caught up in financial turmoil.

In what Congress-watchers predict could easily be a repeat of November’s debacle over Clinton’s “fast-track� trade legislation, conservative Republicans and liberal Democrats are teaming up to defeat legislation to provide money for the 181-country International Monetary Fund, which is leading the Asian rescue effort.

The IMF legislation includes authorization for a $14.5-billion line of credit to serve as the U.S. share of a 45%, $90-billion increase in the organization’s overall lending resources, agreed upon in September. Also in the bill is $3.5 billion for an emergency fund to deal with Asia.

If the United States does not come up with its more than 15% share of the $90 billion, that could cripple the organization’s Asian rescue effort. The United States also has about 15% of the IMF’s voting power and, because major loans require an 85% majority, the IMF cannot make any such loans without U.S. approval.

Congressional strategists said during the weekend that informal vote counts show support for the IMF bill so low that it easily could lose. The administration has had Treasury Secretary Robert E. Rubin quietly lobbying lawmakers for support.

“This is very quickly shaping up to be another bitter fast-track vote,� said Harald B. Malmgren, a veteran Congress-watcher. Clinton was forced to withdraw that controversial bill, which would have denied Congress the opportunity to modify international trade agreements reached by the administration, after failing to win enough votes to avert a formal defeat.

A Republican congressional strategist added that fewer Republicans would support Clinton on the IMF than the 140 (nearly two-thirds of House Republicans) who were prepared to back him on fast-track negotiating authority.

“There’s no base of ideological support here, as there was when the free-traders backed the fast-track legislation,� the Republican strategist said. “This is going to make the passing of fast-track look easy.�

The White House hopes new support among House Democrats will more than offset any Republican defections. House Minority Leader Richard A. Gephardt of Missouri, who helped galvanize liberal opposition to fast-track legislation last year, has said he will support the IMF bill. Minority Whip David E. Bonior (D-Mich.) opposes it, but without Gephardt he loses some of his influence.

Analysts say the opposition reflects a growing isolationism in Congress, spurred by mounting resentment among voters over recent corporate downsizing and the shift of a large number of U.S. jobs overseas--the same anxieties that fueled the sentiment against fast-track authority.

The Asian countries that are benefiting from the IMF rescue effort are the same ones whose exports to the United States provided such fierce competition for U.S. auto and steel manufacturers in the 1980s.

Moreover, without the Cold War’s threat to American security, many Americans no longer believe it is urgent that the United States provide global leadership on international economic issues. “You’ve got a far different situation these days,� Malmgren said.

The similarities to the fast-track issue are striking. In the past, Congress has routinely approved the U.S. contribution to the IMF, just as it has easily renewed the president’s fast-track authority.

And, as in the case of the fast-track bill, the IMF opposition stems from an odd-couple alliance of isolationist Republicans and protectionist Democrats, with backing from organized labor and environmentalists. Some lawmakers’ personal distrust of Clinton is also a factor.

This time, however, there is an added issue motivating lawmakers: anger over the belief that, thanks to the IMF’s rescue efforts, big multinational banks, whose questionable lending practices helped leave Asia vulnerable to financial collapse, are not being forced to take the losses they may deserve.

Rep. John J. LaFalce of New York, ranking Democrat on the House Banking Committee and a longtime supporter of U.S. efforts in the IMF, said Congress simply would not approve the money Clinton wants “unless the banks are required to take some form of financial hit.�

Congressional strategists say many lawmakers on both sides of the aisle, including many conservative Republicans, feel the same.

Sen. Alfonse M. D’Amato (R-N.Y.), chairman of the Senate Banking Committee, said recently that he had “some very serious reservations about current U.S. policies� and would seek to ensure that “speculators and others who’ve taken advantage of the situation� do not get off painlessly.

The welling-up of congressional opposition to the IMF bill has sent the Clinton administration scrambling for a way to assuage lawmakers, but so far the White House has been unable to come up with a strategy that looks as though it might succeed.

In his lobbying, Rubin has insisted that ordinarily he “wouldn’t spend a nickel� to shield banks from taking a hit, but he argues that there is no way to avert a full-fledged financial disaster in Asia without protecting them to some degree.

Rubin has been prodding the banks to roll over their overdue loans to South Korea, both to ease the financial strain on Seoul and to make the banks feel some pain. A group of some half-dozen big American banks is negotiating with the South Korean government to rework some of the bad loans.

So vehement is congressional opposition that it threatens not just the IMF bill but also Clinton’s second try at his fast-track bill.

In addition, conservatives led by Sen. Lauch Faircloth (R-N.C.) are seeking to limit Clinton’s ability to use cash from the exchange-stabilization fund, which the Treasury Department uses to provide contingency loans for countries such as South Korea when other sources run dry.

As in the case of the president’s right to send troops abroad to meet crises, the fund has enabled presidents to respond quickly to emergencies when going to Congress might have meant crippling delays. The Reagan administration, for example, used it routinely in the 1980s to provide temporary loans to Latin American governments that could not otherwise meet their bank payments.

During the 1995 Mexican peso crisis, however, the Clinton administration enraged lawmakers when it used the exchange-stabilization fund to provide Mexico with $12 billion in loans after Congress itself rejected a larger request made through ordinary channels.

Despite the similarities to the politics of the fast-track bill, a few facets of the IMF controversy work in the administration’s favor.

As demonstrated by Gephardt’s decision to support the administration, the anti-fast-track coalition is not so unified on the IMF bill.

Organized labor is not pulling out all the stops to defeat the IMF bill the way it did on fast-track. Union officials say the issue is simply not as important to them.

Moreover, Democrats do not care much about Faircloth’s effort to limit the exchange-stabilization fund.

Finally, unlike the situation surrounding the fast-track bill, Clinton can argue with some credibility that if Congress derails the IMF’s rescue effort, it could push the Asian economies deeper into the mire and ultimately bring on a worldwide recession--a blame that few lawmakers are willing to shoulder.