House Republican leaders have spearheaded the opposition to full IMF funding, putting them at odds with a broad coalition of global political, business and financial leaders who insist that, whatever its flaws, the IMF urgently needs the full $18 billion to help stabilize the quaking global economy.
Rather than go along, House GOP leaders plan instead to use their $3.4 billion IMF offer as a bargaining chip in negotiations with the Senate over the final terms of this year's foreign-aid bill. Republican leaders hope to attach conditions restricting the use of foreign-aid funds in exchange for yielding to Senate demands for the full $18 billion for the IMF, according to a discussion of the tactic in floor debate.
While House leaders discussed parliamentary tactics yesterday, the Dow Jones average of blue-chip stock prices sank about 216 points, following similar plunges in Asia, Europe and Latin America.
The latest drops renewed fears that the global financial crisis was spreading. Business and financial experts said House gamesmanship with IMF funds at such an anxious moment could make troubles worse.
``It does not send a good signal'' to the world, said Willard Workman, the U.S. Chamber of Commerce vice president for international affairs. ``It doesn't demonstrate that we in the United States have our act together on the whole issue of the financial turmoil, not only in Asia, but increasingly in Eurasia and Latin America.''
Congress is scheduled to adjourn for the year Oct. 9. The House appears likely to accept the full $18 billion in negotiations with the Senate by then, Workman said, because its members fear voters will blame them for ruining the global economy if they do not.
``The closer the members get to elections, the more concerned they are about accountability,'' Workman said. ``The more turmoil there is in the markets, when 40 percent of American families own stocks - they're going to blame somebody. And members of the House have set themselves up to be the scapegoat on this issue just through their inaction. They are coming to realize they are in some peril here,'' he said.
``If in the end they are going to pass the full amount, then they ought to do it now,'' said Catherine Mann, a senior fellow at the Institute for International Economics, a research center here.
``Now is the time. In three to four weeks, it's hard to know how much worse it is going to become. Brazil is on the front lines now, taking the hits, and it is quite true that if Brazil goes, so does Argentina and most of Latin America,'' Mann said.
House Majority Leader Dick Armey (R., Texas) heads the anti-IMF effort, arguing that the institution wastes money, is unaccountable and imposes wrong-headed policies on nations that accept its loans.
``The evidence is now undeniable that the IMF has played a destabilizing role in world financial affairs,'' Armey declared in a letter to House members earlier this month. ``Russia simply took the IMF's latest $4.8 billion loan installment and threw it into currency markets, where it was instantly vaporized.''
In debate yesterday, Rep. Sonny Callahan (R., Ala.), floor manager of the IMF bill, conceded that the IMF might merit more money at some point, but with the global economy changing so rapidly, ``I do not think we should do it at this time.''
Democrats led demands for full IMF funding now.
``It's been nearly a year. How long will we fiddle and allow the world to burn because the House will not act?'' demanded Rep. Ken Bentsen (D., Texas).
House Rules Committee Chairman Gerald B.H. Solomon (R., N.Y.) argued that the IMF often required countries to raise taxes as a condition for loans.
``That goes against everything we believe in,'' Solomon said, speaking for Republicans.
The IMF imposes such conditions when it deems such fiscal reform necessary in order to stabilize a nation's economy. Even the IMF's defenders acknowledge that its policies sometimes have backfired, but they argue that the IMF is adapting to an unprecedented crisis and remains the only institution capable of responding.
``While the IMF may not be a perfect instrument, it's the only one we have. Particularly in financial markets, speed is of the essence. He who hesitates is lost,'' said Workman of the Chamber of Commerce.