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"During the past eight months, the JEC has been examining the issues raised by a proposed expansion of the IMF," said JEC Chairman Jim Saxton (R-NJ). "For example, the excessive secrecy of the IMF and its use of subsidized interest rates contradict the goals of transparency and economic efficiency. Futhermore, a large IMF bureaucracy operating behind a veil of secrecy is not consistent with accountability in public policy. We are fortunate to have such distinguished witnesses before the Committee to discuss these and other issues."
Saxton previously has identified five areas of concern about the IMF:
- Moral hazard: IMF bailouts encourage investors to assume additional risk in pursuit of extra normal returns in the expectation that losses may be absorbed by the IMF.
- Loan subsidies: Subsidized interest rates encourage economic inefficiency and exacerbate the moral hazard problem. Currently, the standard IMF loan rate is about 4.5 percent.
- Transparency: The IMF is a closed and secretive organization that operates in a manner inconsistent with U.S. performance and accountability standards. This is why Chairman Saxton has recently requested a General Accounting Office (GAO) review of IMF finances.
- Exposure of taxpayer funds: U.S. government funds are used directly and indirectly in subsidized bailouts that promote perverse incentives leading to a more vulnerable financial system.
- Inappropriate conditions: Counterproductive policies that undermine economic performance are sometimes imposed by the IMF as loan conditions.
Hearing Topic: The International Monetary Fund and International Economic Policy
Date: Tuesday, May 5, 1998
Time: 10 a.m.
Place: 2237 Rayburn House Office Building
Witnesses:
Panel 1
George P. Shultz, Distinguished Fellow, Hoover Institution
Panel 2
William A. Niskanen, Chairman, CATO Institute
Paul A. Volcker, Former Chairman, Board of Governors, Federal Reserve System
Lawrence B. Lindsey, Resident Scholar, American Enterprise Institute
Press Release: #105-131
