THE WHITE HOUSE
Office of the Press Secretary (New York, New York) ________________________________________________________________________ For Immediate Release September 14, 1998
PRESS BRIEFING BY SECRETARY OF THE TREASURY ROBERT RUBIN AND DIRECTOR OF THE NATIONAL ECONOMIC COUNCIL GENE SPERLING
The Waldorf Astoria Hotel New York, New York
12:56 P.M. EDT
SECRETARY RUBIN: Good afternoon. Let me just start with a very simple comment, and then we'd be happy to respond to anything that you all would like.
You've heard or read the President's speech. He has been enormously involved in these issues since we started focusing on Thailand, now over a year ago. And what that speech did was to express his views as to -- the views that he has spent an enormous amount of time working through with all of us -- his views as to what is responsible for the situation and the circumstances we now face, what we have been doing, what we need to do as we go forward both to deal with the immediate situation and circumstances as well as the larger questions, as he said, of the financial architecture of the global economy.
And with that, Gene Sperling, head of the National Economic Council, and I would be delighted to respond to any questions that you might have.
Q Is the President then asking for the Fed to lower rates, because that certainly seems to --
SECRETARY RUBIN: No. The question was, is the President going to ask the Fed to lower rates. Was that the question?
Q Or is that what he's asking them --
SECRETARY RUBIN: No, the answer to that is absolutely not. His view -- and has been his view since the beginning of this administration -- is to respect totally the independence of the Fed and that that respect for the independence of the Fed contributes to the credibility that we have in markets in around the world. That has been his view from the beginning and it seems to me it's absolutely the right view.
No, what he was saying -- and let me say I think you will find that this is a broad-based view -- I know it's a broad-based view amongst finance ministers and central bank governors in the G-7 -- is that just as our focus over the past year has been on financial stability, restoring financial stability and growth, that the risks of inflation, as the Chairman said, Chairman Greenspan said last Friday, have diminished and there needs to be a shift. And there's been a focus on growth through this whole period, but that focus needs to be even more intense now. And that's what he was saying.
What each of us is involved in economic policy should do is another question. We deal with fiscal policy and a whole range of issues that relate to the question of economic policy and the Fed deals with monetary policy.
Q Mr. Secretary, can you tell us more about your plans --
SECRETARY RUBIN: We began work, as the President said, I guess it must be close to a year ago now, on this question of carrying forward the reform of the international architecture -- which he actually began calling for, I think it was four years ago in Naples -- and then a similar set of proposals came out in Halifax three years ago. As he said in his speech the focus of -- a group was put together of the G-7 and then other developing -- well, the G-7 and then developing nations around the world. It's worked very well together. It's really been a very good process.
The focus has been on three areas: transparency -- and some of this has actually already begun to get implemented -- dealing with financial sectors and strengthening financial sectors in developing countries because in virtually every instance -- not every instance, but virtually every instance in which there's been instability, financial sector problems have played a significant role, either a causative role or an exacerbating role. And then the question of the private sector, creditors and investors, bearing the consequences of their actions or taking the consequences of the risks that they have assumed as totally as possible. That has been the focus of this group that was called the G-22 or the Willard Group.
What the President suggested in his speech, which we have all been talking about with him, is continuing that focus at the same time, working more broadly on the question of the financial architecture for the years ahead. And that is the discussion that we will have when we all reassemble. I don't know exactly when we'll do this, but I would guess it would be toward the end of the 30 days he talked about. And I do think that in the working groups we've had on the three areas that I mentioned, there has been a lot of very good thought, but these are extraordinarily complex issues; these are not matters that are going to be resolved quickly. I presume -- in fact, I'm confident -- that there will be some judgments as to steps that the international community ought to take and that in other areas, these kinds of judgments will develop over time.
But what this is a continuation of, an energizing of a process that he really initiated quite some time ago that I believe is very centrally important and will go on, I'm sure, for a long time to come with respect to all of those who have an interest in the global economy.
Q I'd like to follow that. I guess I had the sense that he was saying today there was an emergency; I had a sense there was, you know, just more urgency than actually a continuation of a year long process.
SECRETARY RUBIN: Mo, well, what he was saying is it clearly is a very serious issue in the world today, as he said, may well be in many respects the most serious situation the world economy has faced in the last 50 years. It's both a continuation of and an enhancement of -- it's a continuation of that which has been doing on and an enhancement, and an additional thrust forward, which I think will have to continue for all of us for a long time to come.
MR. SPERLING: I'm sorry. I just wanted to -- in response to your question. If you look at the structure of the President's speech, which he outlined right at the beginning, he talked about six immediate steps. And then he talked about that there were two longer-term architecture issues. One was in the trading area where he referred to his Geneva speech on the reform for the WTO.
And then he also talked about the reform in the financial architecture, and talked about expanding what had been worked on to deal with some of the issues of contagion for countries who while may still need reform, that may not be the reason that they're having the problems. Those raise difficult issues.
So six of the issues he would put forward were all in the immediate context, and then he was saying, essentially, it's not too early to begin learning those lessons and start building them into our longer-term financial architecture reform process.
SECRETARY RUBIN: And in effect -- just to echo what Gene said -- in effect, extending the reach of the G-22, if that in fact is going to be the group, into a broader range of issues -- although the issues they're focused on are extremely important.
Q Mr. Secretary, you noted that monetary policy was properly -- the Federal Reserve.
SECRETARY RUBIN: Correct.
Q -- policy with administration.
SECRETARY RUBIN: Correct.
Q Is the President really considering using any instruments of fiscal policy, such as --
SECRETARY RUBIN: Well, as he said in his speech -- and I think this is absolutely right -- it is our view that the fiscal discipline that began with the '93 deficit reduction program has been central to the economic prosperity that we've had in this country for now close to six years. And it is our judgment that the best thing that this country can do going forward to maintain strong domestic economic circumstances and conditions is to continue on that path of fiscal discipline.
So our view would be that there should be absolutely no tax cut and absolutely no spending increase until Social Security has been addressed. And that is right not only with respect to the question of dealing with Social Security, but is right with respect to continued economic prosperity.
Q Can I follow on that?
Q In talking about providing credit to Asian --
SECRETARY RUBIN: Are you talking about the restructuring comment that he made? No, let me clarify that, because it is important.
As you know, in a number of these Asian countries you've had very large numbers of private sector enterprises that are having financial difficulties because of what has happened in their economies. And what he was saying was -- and we've given a fair bit of thought to this, we and others around the world -- that you can't -- it is not effective, or not totally effective to deal with these enterprise to enterprise, but that it would be useful to have more systemic ways of dealing with these kinds of issues. And in Thailand right now, for example, they really have been making good progress on dealing with the problems, these kinds of problems, in their banking sector. And what he was referring to is measures to help these nations deal more systemically with the questions of restructuring.
Q Such as?
SECRETARY RUBIN: I'd like to leave it at that for the moment, because we are continuing to work on those ideas and possible measures. And when we're ready we'll obviously say whatever it is that's on our minds.
Q Mr. Secretary, I have a Secret Service question. Betty Currie indicates in the Kenneth Starr report that she had WAVES clear Monica Lewinsky into the White House without going through the regular Secret Service channels; and at the northwest gate somebody was apparently told not to write up reports about here entrance. Will the inspector general from the Treasury take a look at that?
SECRETARY RUBIN: Let me say that there are a goodly number of people to respond to questions in that whole area. What I'm here today to talk about is what really is of central importance to the world, which is a global financial crisis. There will be others to respond to that.
Q Well, you're the Secretary of --
SECRETARY RUBIN: I am, indeed. And let me say that we will do whatever is appropriate. Beyond that, I think I would keep my comments today to this global financial crisis, which is of extreme importance not only to the rest of the world, but to us.
Q Mr. Secretary, does the crisis you just mentioned -- I remember initially I think it was at the Denver Summit of the 8, the President described it as a bump in the road. What I'm wondering is if somebody has been working on this for more than a year, to what extent do you think this problem is amenable to U.S. actions and policy? Or to what extent do you feel that you're improvising on a problem that is going to be largely impervious to the U.S. actions one way or the other?
SECRETARY RUBIN: This problem is, as you correctly say, at least in our judgment -- and I think the Chairman expressed similar views on Friday, if I remember correctly -- this problem is a function of enormous forces, the forces of the global financial markets. And I've said this before publicly, I think what you've had is very large flows of capital which to some extent -- to some extent -- have involved an under-analysis and under-weighting of risks. As people do well they tend to get less careful about such things.
So in the final analysis you had excessive flows into systems that very often -- not always, but very often -- were badly flawed financial systems. And I think that really lies at the heart of a lot of this. I think that the kinds of things -- and the question now, as the world works it way through the unwinding of the excesses, to do all that is sensible to minimize the difficulties that flow from that, and that is what we have been about. And I think a lot of what we have done really has been extremely important and very helpful.
I think with that objective and with that context in perspective I think that we have done a lot that's constructive, and I think we can continue to; but it is also true that there are forces that are going to work their way through the world.
Q Mr. Secretary, what impact do you think, if any, the Starr report or talks of impeachment have had on these markets or the global economy?
SECRETARY RUBIN: Oh, I don't know. You know markets respond to all kinds of things, and I think what we need to focus on is what I am sure is a very large set of influences, not only on markets but on economies and on trade and commodity prices and all the rest, and that's these issues of the global economy. And that is what the President's speech -- I think a very thoughtful and very powerful speech -- was about today, and that's what we are about.
Q Mr. Secretary, have any of your colleagues, have any finance ministers or officials from other countries raised this with you, that said can America deal with this crisis right now? Have they raised any concerns with you in the past --
SECRETARY RUBIN: No, in fact, exactly the opposite has happened. We have been -- I think the President alluded to this -- we have been in touch with finance ministers around the world extensively over the last -- well, we are on a regular basis, but particularly over the last several days. And I think the exact opposite that has actually had come across. There is no nation in the world that can provide leadership on these issues other than the United States.
We all have an important role to play, and we all need to work together. But they really do -- there really is a recognition that the United States is the country that can provide leadership. And they have enormous respect for President Clinton, personally, with respect to his understanding of these issues and leadership he has provided on these issues.
And the answer to your question directly is, no, I have not heard anybody express the concern you mention. But I have heard a number of people reiterate what I've heard as long as I have been at the Treasury Department, which is this is where the leadership needs to come from and has been coming from.
MR. SPERLING: Let me just add that as recently as Friday, Tony Blair called the President, who is the Chair of the G-7 and, as I think would be consistent about the last three conversations they had, it was these issues that took up significant amount of their time -- some was certainly on Ireland -- but a significant amount of their time and very much talking about the role, leadership role in having a cooperative G-7 approaches to these issues and the importance of the President's leadership.
Q Mr. Secretary, the President challenged the House to go ahead and approve the additional $18 million in IMF funding. Newt Gingrich, I believe, a few weeks ago sent a letter to the President saying that, first, he needs to explain to his constituents what happened to the $4.8 million that went to Russia in July. What's the answer to that?
SECRETARY RUBIN: Well, actually, my recollection of that letter -- because I think that letter was addressed to -- I think it was addressed to me, wasn't it? Yes, my recollection of that letter was it raised a broader set of questions about Russia, and I think they were thoughtful questions. And the sequence actually was, I had sent the Speaker a letter, emphasizing the importance of funding and the importance of dealing with the issues of the global economy.
My recollection is that his response was something to the effect that he also -- he well recognized -- you can look up the letters and see how accurate that recollect is -- he well-recognized the importance of these issues of the global economy; but he wanted to get answers on a number of questions on Russia. We have since sent him a letter back in which we provided our views with respect to the situation in Russia.
And the bottom line of it, in a word, was Russia was of enormous importance -- the stakes in Russia were enormously importance with respect to our economy, but even more our national security -- that the IMF program was thoughtful and well thought through but ultimately, the only thing that can work in Russia is what the Russians are able to do politically. That we all knew when the IMF engaged in this program that there was a real risk this wouldn't work; but on the other hand, the stakes were so high, this was enormously worth doing, and the onus rests on the Russians to put in place the kind of reform that we can all coalesce around and support.
Q Gene, could you describe the President's involvement both in the policy formulation that led today's speech and in the specific language? How much of this reflects his direct involvement, and when has that involvement taken place? He's obviously had a lot on his mind in recent days besides this conference.
MR.SPERLING: Well there's been considerable time and discussion with him in August; a significant amount of that was on Russia. We had several conference calls with him in August, where we would talk about Russia. We would often start those calls by doing an update of other things that were happening in the global economy.
The most specific on this speech, on Labor Day -- as I was calmly going to the airport, I got a call from Secretary Rubin saying that the President wanted us all back for a conversation that evening. We ended up meeting in the Yellow Oval Office -- myself, Secretary Rubin, Deputy Secretary Summers, Madeleine Albright, Leon Fuerth, Sandy Berger, Jim Steinberg. And we had, I'd say an hour and a half to two hour discussion where we went over what some of the elements might be in such a speech,with the caveat that a lot of these things would have to be worked and that there would be a lot of discussion going on with G-7 partners.
We've continued to have conversations with him in terms of briefing before the Blair phone call, the Yeltsin. So there's been a considerable amount of discussion. And we got things to him over the weekend. He read it and did a full rewrite that he gave to Michael Waldman and myself yesterday evening. We included that with the other edits of his Cabinet and got back to him after 11:00 p.m. last night; met him in the Oval Office and discussed further. And then he worked on it more on the plane today. So he was extremely involved throughout in the shaping of it initially. Our instructions as we went forward came from the Sunday night -- excuse me, I guess it was Monday night, Labor Day night meeting -- and then a significant back and forth over the weekend.
Q A lot of his speech was about the IMF and urging Congress to give more money. If he wasn't able to do that before given the current environment, how do you expect that he can convince Congress to do anything?
SECRETARY RUBIN: Well, let me say, part of his speech -- there was a lot else in that speech -- you know, as he said in the Senate, we've had three votes now on the IMF funding, and in every one we've had overwhelming bipartisan support majorities -- overwhelming bipartisan majorities. The question is getting it through the House.
I actually think we are making progress, and it's been a very difficult political issue in the House. It continues to be difficult; it is bumpy. But I think the answer is very simple. It is imperative, and the whole world feels it's imperative, and the world is right. And I think Congress has to continue to focus on that and get it done.
And I believe in the final analysis, despite the political difficulties, we will get it, not because it's an easy vote politically -- it is not easy -- but because it is imperative for our economic self-interest.
Thank you all. I've got to go. Gene will still be here.
MR. SPERLING: Let me just add that our feeling is that domestic pressure, political pressure for the IMF funding, is increasing as the rural and farm problem has stayed in a serious plight. And we have found, repeatedly, when the President has done his radio conference, Rural Farm Radio press conference, that the IMF has become an issue that people in rural America and farmers understand is important to regaining the demand that will help increase their exports and help start to restore some growth in some of the hard hit rural and regional areas. And this is an issue we have talked considerably about with Senators Dorgan and Conrad, Daschle and Harkin.
Q Can I follow up on that? Is the President going to be more involved in talking to members of Congress about the --
MR. SPERLING: You know, I think I did read that somewhere this morning, but I really don't know what that refers to. The President has pressed this at every step and at every place we have gone and spoken. I think, the most consistent messages has given is the Social Security first message and the IMF message. And as you remember, this was a major part of the President's State of the Union in January, when he spoke very seriously about the need to IMF back then as he said before the storm clouds were closer overhead.
Q Just really quickly. You talked about spurring global growth. Do you think that U.S. growth is too slow right now?
MR. SPERLING: I think that what we tried to suggest -- the President, I think, went to great pains to suggest is that among Europe, U.S., and Japan, there is a need to act together to restore global growth, but that the recipe in each country or region is often different. What has clearly worked in the United States is that fiscal discipline has brought long-term interest rates down to historic lows. That has lead to five, going on six years of double digit investment growth.
I don't know if there's another time in our century where productive investment has grown over 10 percent five years in a row. So we're saying is our recipe is quite clear: the connection between fiscal discipline, lower interest rates and productive investment has allow the capacity of the U.S. to expand and allow growth to go on at a sustainable pace.
For Japan, you clearly have a very different recipe. There they have historic savings rates, but they have pathetic growth and a need for significant demand. And perhaps most importantly, a need to show that there will be prompt, significant corrective action on their banking and financial restructuring.
And so what the President was trying to do is lay out that. I don't think you can look at the last 14 years and suggest that the best recipe in the United States is having either new tax cuts or spending programs that are not paid for and losing our fiscal discipline. Our recipe for success has been quite different.
Q Gene, the part of the speech that dealt with debt relief was a little bit vague about what he had in mind for the banks. Can you spell that out a little more?
MR. SPERLING: Well, Secretary Rubin did answer that, I don't want to go too much beyond. But he is referring to the domestic debt problems in countries where there's been a systematic problem that has put a significant number of corporations and companies in debt problems; and where it is not clear that a U.S. style bankruptcy, case-by-case approach would be either fast enough or deal with a systematic nature.
So the goal is to explore whether there are comprehensive approaches that would give incentives for all the players -- for the banks, for the other creditors and for the companies to try to get this debt overhang out of the way so that they could begin getting new capital and investing and expanding. And this is something that certainly Secretary Rubin and Treasury has been working on, and the President is asking them to expand those efforts. But at this point, I don't think it would be prudent for us to go into more detail.
Q Thank you.
MR. SPERLING: Thanks.
END 1:20 P.M. EDT