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Rescue Plans: Weighing Some Options
There are some ideas on which just about everyone can agree. Emerging
countries should supervise banks more closely and adopt more rigorous
accounting standards. Better information should be gathered and disseminated
about emerging-market debt. And Congress should provide the IMF funding that
the Administration has requested. But there's a debate over more far-reaching
efforts. Here are three proposals, with arguments pro and con.
BATTEN THE HATCHES
Put controls on the flow of foreign capital to insulate emerging economies from
global financial markets.
PROS CONS
Action may be focused on Government intervention can
short-term capital flows choke off investment and
rather than beneficial growth. Government control
long-term investments. of foreign exchange can
Controls can be reversed encourage inefficiency
if they are no longer needed. and corruption.
MAN THE LIFEBOATS
Strengthen the IMF's hand by pumping billions more into the Fund and turning it
into a true lender of last resort.
PROS CONS
Resources would be available Lining up funding would
to defend embattled cur- be difficult. The ''moral
rencies. Troubled countries hazard'' problem, in which
could get enough funds to get private lenders count on
back on their feet again. public bailouts, might
create bigger future
problems.
START OVER
Codify debt rescheduling by allowing countries to petition the IMF to file for
a debt-standstill agreement. This global Chapter 11 should spread risk and
encourage more prudence.
PROS CONS
Borrowers are more likely to The legal framework for a
receive trade financing and global Chapter 11 does not
could recover more quickly. yet exist. Countries might
Creditors would be more petition the IMF for debt
cautious, reducing the odds relief too readily.
of future financial crises.
DATA: BUSINESS WEEK
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Updated Oct. 1, 1998 by bwwebmaster
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