Clinton Urges Economic Changes

Calling for more work to ward off a worsening global economic crisis, President Clinton says he wants to build a new financial system that reduces risk so countries can safely benefit from free capital markets.

Mr. Clinton said Tuesday the worldwide financial crisis can be resolved with concerted global action, but cautioned that the turmoil could spread unless urgent steps are taken.

"I am confident that if we act together we can end the present crisis," the president told a joint meeting of the International Monetary Fund and the World Bank.

"We must take urgent steps to help those who have been hurt by it, to limit the reach of it, and to restore confidence in the global economy."

He said the "cycle of boom and bust" in the global marketplace must be contained, in part by more openness among governments and a willingness by developing nations to act swiftly to reform their economies.

"We must modernize and reform the international financial system to make it ready for the 21st century," Mr. Clinton said.

He also cautioned against "false cures," an apparent reference to government controls on flows of capital and trade protectionism.

Mr. Clinton spoke of the urgency of the crisis, which has rocked much of Asia, hammered Russia, and is now threatening to damage Brazil and other parts of Latin America. Even the U.S. economy the strongest in the world is beginning to feel effects of the crisis with slower job growth and unstable markets.

"We don't have a moment to waste," President Clinton said. "Unless the citizens of each nation feel they have a stake in their own economy, they will resist reforms needed for recovery."

As Mr. Clinton was addressing what he calls the gravest threat to the world economy in 50 years, U.S. officials worked behind the scenes on a multibillion-dollar rescue package for Brazil. It is the latest country to come under threat from a crisis that has swept through Asia and Russia in the past 15 months.

Mr. Clinton called on Japan to invigorate its economy, largest in Asia. Japan has been stuck in a long and steep recession, and its banking system is in deep trouble.

"A healthy Asia and the world is dependent on Japan," he said.

He welcomed Japan's announcement that it would provide $30 billion in loan guarantees and other assistance to other Asian nations.

On Monday, Mr. Clinton told senior finance officials from 22 countries that international financial systems in place since the end of World War II face new challenges. Officials must build "a system that will lessen and manage the risks in the global markets so countries can benefit from free-flowing capital in a safe, sustainable way," he said.

The 22 nations focused on preliminary ideas to improve banking regulation and provide quicker, more accurate financial data from various countries, in order to guard against surrises that might trigger foreign investors to pull out.

The special conference of finance ministers and central bank presidents was one of several ways the Clinton administration is seeking (with little success) to instill confidence in shaky markets.

After wild swings Monday, the Dow Jones industrial average was up 80 points in late morning trading Tuesday but was still 1,600 points below the record set in July.

In other countries, investors were disappointed that weekend meetings among the Group of Seven wealthy nations failed to produce any major new ideas to deal with the economic problems.

The IMF provides financial aid to economically weakened nations. As a new report from the Treasury Department shows, every state in the nation is being economically weakened by the global financial crisis. The bulk of the problem is that 30 percent of all U.S. exports go to Asia. Consumers there can't afford to buy American goods now.

Here's how the president explained it to fellow Democrats Monday night: "If you want to send a message, you want America's economy to keep growing, you know that we have to help the world to avoid this crisis and do our part."

Of the report, Treasury Secretary Robert Rubin said, "Events in Asia, Russia and Latin America are having a direct impact on the prosperity of America's farmers, workers, and businesses."

In California, for example, where companies depend heavily on exports, sales to Asia fell 11 percent from the first quarter of last year to the first quarter of this year.