US Congress challenges banks

US Democrats are demanding that western banks shoulder more of the burden of the bailout of troubled Asian economies before Congress supports President Clinton's push for more funding for the International Monetary Fund (IMF).

Democrat head-counters say only about 150 of 431 congressmen from both parties in the House favour new IMF funding. Mr Clinton is seeking $3.5 billion (£2.55 billion) for the Arrangements to Borrow fund and $14.5 billion for the US share of new IMF resources.

Key Democrats are saying privately that western banks will have to be consistent in deciding which loans to roll over, charging no fees and not raising interest rates. They also want more transparency at the IMF and greater detail of all rescue operations.

Further money for the IMF is particularly unpopular in an election year, with voters concerned that their tax dollars are going to save foreign companies and big banks. A coalition of political figures from both sides is forming to oppose the funding.

But Mr Jeff Faux, president of the labour-backed Economic Policy Institute, said it would differ from the alliance that defeated Mr Clinton's bid for a fast-track trade negotiating authority last year.

Democrats in the House of Representatives broadly support IMF demands for restructuring Asian economies to open their markets to foreign investment and imports. But they also want social programmes - such as unemployment insurance - to give Asian workers a safety net.

"Most of the resistance is coming from the Republican side," Mr Faux said. "With the Democrats, the president has a basis for negotiation. They don't want to go against him again. And they are not against the idea of having a bank that can step in and provide liquidity for economies that are going down the tube."

Mr Alan Tonelson, of the US Business and Industrial Council, accepts the argument of many Republicans that the Mexican bailout made the Asian bailout inevitable. "It was interpreted as a guarantee that countries will not be allowed to go bankrupt."

Most US experts believe the IMF has enough funding to handle the Asian crisis without a US contribution. But failure by the US to pass the IMF funding bills would signal a decline in US leadership, said Mr Morris Goldstein of the Institute of International Economics.