Mixed Reaction for U.S. Global Finance Plans By Knut Engelmann WASHINGTON (Reuters) - A fresh initiative launched by Washington to improve the global financial system in response to Asia's financial crisis has been stymied by a lack of new ideas and a lukewarm response from some key allies. Now the pressure is on U.S. Treasury Secretary Robert Rubin to come up with a map for the way ahead. If he fails, an opportunity to learn the painful lessons that Asia's crisis could teach both governments and private investors may be lost, analysts said. "They have no ideas whatsoever," said a government official from one of the Group of Seven industrial nations. "I guess that's why they want to talk about it." Overwhelmed by the financial crisis that struck Mexico in 1994-95, leaders of major industrial countries agreed at their June 1995 summit to establish a new early warning system. Critics say the plan was woefully inadequate and failed to forestall current troubles. Not much has happened since. In a speech last week, Rubin again said Washington was seeking to "develop a consensus on further steps" with its G7 partners and other nations linked to the Asian rescue effort. But asked what the financial system he envisioned might look like, Rubin admitted with a laugh: "The answer to that I do not know." As Washington struggles with a new sex scandal that many say will weaken President Clinton's leadership, his administration's lack of concrete designs for a revamped financial system is already reducing its clout in the G7. Rubin's proposal to convene a meeting of finance ministers from around the world -- originally announced by Clinton at the Asian Pacific Economic Cooperation summit in Vancouver last November -- stirred little excitement in other capitals. French Finance Minister Dominique Strauss-Kahn said there was no need for a special meeting since the G7 would discuss Asia at its scheduled meeting next month. He said the real concern now was competition from cheap Asian imports. Germany said there would be no separate G7 gathering, although Britain welcomed the plan as a "very constructive idea". Tokyo said it had yet to be informed about any such meeting. "I don't think anyone really has a very clear notion of what the general strategy for dealing with these problems should be, or indeed what the next steps ought to be," said Princeton University economics professor Peter Kenen. The IMF itself, which Washington insists must be at the center of any international rescue strategy for troubled economies, takes a cautious attitude to suggestions of change. "I think more steps need to be taken. But they're all suspended waiting for the launch of the Euro," IMF Managing Director Michel Camdessus told French television. "It's only after the Euro will have been established and will have stabilized that we can go on to other concerns." That would put revamping the financial system on hold for at least another year -- Europe's common currency is not scheduled to go into effect before the start of 1999. So far, Rubin's proposals to deal with future crises comprise familiar concepts such as greater transparency, stronger financial institutions, and better regulation. He also wants the international community to seek ways of ensuring that private creditors, particularly large banks, pay the price for bad loan and investment decisions. But analysts say this is easier said than done -- letting banks fail risks widespread financial collapse that could hit the booming U.S. economy with a vengeance, while simply bailing them out could encourage even more reckless lending. "I just don't see that there's very much we can do about it with the instruments and agencies that we have available," Kenen said. The lack of ideas to solve this puzzle has contributed to mounting domestic opposition to the IMF and Washington's role in bailouts for troubled Asian nations, in which the international community has dished out $100 billion in loans. Clinton has asked Congress to approve a total of almost $19 billion in fresh money to bolster the IMF's depleted coffers, but his chances of winning approval appear increasingly slim. Senate Majority Leader Trent Lott said Friday the IMF was dogged by policy and leadership problems and needed to be reformed before any more money could be made available. U.S. officials realize they have to find a solution if they want to convince both Capitol Hill and their partners abroad that they have the ideas needed to prevent the financial crises of the future. But they also know there is no quick fix. "I don't see a silver bullet out there that's going to make all this go away," the U.S. Treasury's Assistant Secretary for International Affairs, Timothy Geithner, said Friday.
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