Secretary of the Treasury Robert Rubin on Sunday ruled out an American-led bailout of the Southeast Asian nations struggling through a currency crisis and a sharp stock market drop. But he left open the possibility of a broader role for the United States through international organizations seeking to restore financial stability.
Rubin, speaking on ABC’s “This Week,” said, “We’ve been a very active and very important part” of an international response to the troubles that resounded in markets around the world last week. But he said the kind of bailout program the United States designed for Mexico in 1995 “is not envisioned here.”
As he spoke, however, Rubin’s subordinates at the Treasury Department were scrambling to come up with backup plans in case the programs emerging from the International Monetary Fund and the World Bank prove insufficient. Among them, said people familiar with the planning, is the possibility of some kind of supplemental financing for Indonesia, which is negotiating with the IMF over fiscal reforms. Those negotiations are expected to be completed in the next week or two.
The IMF already has announced a $17 billion package for Thailand, in which the United States did not participate. But Thai officials have not put into effect key parts of the program, which center on government spending and reform of the country’s banking system.
It is still unclear whether political instability caused by the economic crisis could interfere with Thailand’s efforts to fulfill those pledges. Last week, the problems forced the resignation of the country’s second finance minister this year.
Rubin is in a difficult political position because any major American role in a Southeast Asian bailout would undoubtedly raise a political outcry on Capitol Hill.
In 1995, Congress would not go along with the Mexican bailout - a rescue plan involving a neighboring country whose economy is integrally linked to America’s.
Although trade with Asia is far greater than with Mexico, the stakes are even less familiar to many members of Congress.