The global economic crisis cannot be resolved without intensified efforts by rich and poor countries and foreign investors whose panicked flight spread the contagion, Treasury Secretary Robert Rubin said Thursday.
Rubin called for a "new openness in international finance," in a major policy address intended to lay out U.S. goals in advance of pivotal international finance meetings starting Saturday in Washington."We must move energetically to meet the immediate challenges of the crisis and to build a modern architecture for a market-based system - one that is far less susceptible to systemic instability," Rubin told a business audience.
Rubin said the International Monetary Fund, whose handling of the currency turmoil has been severely crit-i-cized, must overhaul its operations. He also called on Japan to "urgently implement strong effective measures" to boost domestic growth and clean up its troubled banking sector.
And he said that "private-sector burden sharing is critical." Critics of more than $100 billion in IMF-supported bailouts have charged that much of the money has simply gone into the pockets of multinational banks and wealthy investors who made bad decisions.
Rubin said a special conference of finance ministers and central bank presidents proposed by President Clinton will issue preliminary recommendations based on work already done by deputies who have been working on the issue since February.
He said the group had found protecting countries without rewarding bad investment decisions "exceedingly complicated." Some initial recommendations will cover new types of bonds requiring all bond holders to work together in times of economic distress.
Rubin said the working group's report next week would also call for increased openness by the IMF and by individual countries as a way to alert foreign investors to potential problems before they reach a crisis stage.
In Washington Thursday, IMF Managing Director Michel Camdessus said the world's seven richest countries must push for stronger growth to offset steep recessions in many Asian nations and Russia. He endorsed the Federal Reserve's decision to cut a key U.S. interest rate by a quarter-point Tuesday and suggested that European monetary authorities should take similar steps.
Stocks fell further on Wall Street Thursday, extending a global selling spree. The Dow Jones industrial average, which tumbled 237.90 points Wednesday, fell an additional 150.36 to 7,692.26 in midafternoon.
The Dow's 12.4 percent slide in the third quarter, which ended Wednesday, was its worst quarterly performance for the Dow in eight years. The blue-chip average began the day down 65.63 points from where it began this year and almost 1,500 points, or 16 percent, from its July 17 record of 9,337.97.
Stock prices plunged in Asia, with Tokyo shares falling 1.6 percent to a new 12-year low, and shares fell sharply in Europe, where Germany's central bank left interest rates unchanged.
Blue chips in London sank 2.4 percent to new lows for the year, while the key index in Frankfurt, Germany, was down 5.5 percent and the main indicator in Paris was down 3.9 percent.