Trouble at the Credit Union

The last time Congress considered a bill to increase the American contribution to the International Monetary Fund, the measure passed with only a few murmurs of protest. Today, three years after that relatively placid event, a similar proposal has inspired a legislative row and given President Ronald Reagan an annoying political problem. As 13,000 government financial officials and international bankers gathered in Washington last week for the joint annual meeting of the IMF and the World Bank, the problem of the dollar and U.S. interest rates shared equal billing with another pressing concern: the deadlock over funds for the IMF.

Congress's new skepticism is a reflection of a growing belief by many Americans that U.S. contributions to the fund will be used to protect American banks from losses on loans to such overextended nations as Brazil and Mexico. The Reagan Administration is now caught between pleasing a skeptical Congress and avoiding the multinational financial catastrophe that could result from a breakdown of the fund. The main losers in all this, the IMF delegates generally agreed, will be the world's developing nations.

Established in 1944 to help member nations cope with immediate financial crises, the fund makes only short-term loans. The IMF is somewhat like an office credit union into which members put their savings to be drawn on when there is a need. The IMF calls its deposits "quotas," and each of its 146 members makes a contribution to a common pool from which it can borrow when it is squeezed for cash to pay its bills.

Lately, however, so many debt-ridden countries have been going to the IMF that the pool's lendable funds are down to about $6 billion from $13 billion at the end of 1982. In February, the finance ministers who form the IMF's policymaking committee met in Washington and proposed to increase the total capital pool by $43 billion. The U.S. was asked to increase its share in the fund by $7.8 billion. With some heavy prodding from the Reagan Administration, the U.S. contribution bill passed the Senate in June. But it ran into trouble in the House, where members on both the right and the left joined forces to defeat it, largely on the grounds that it would bail out the U.S. banks. The measure finally squeaked through in early August with a six-vote majority.

The National Republican Congressional Committee, however, then set its sights on about 20 Democrats who had voted against an amendment that would have denied IMF credits to Communist countries. The G.O.P. committee sent news releases to the home districts of the 20 Democrats accusing the Congressmen of casting a "vote to support Communism." That so enraged House Speaker Tip O'Neill that he demanded a letter of apology from the President. Without one, said O'Neill, the Democratic leader would not name any members of the Senate-House conference committee that must iron out the differences between the Senate and House bills. In addition, Democrat Fernand J. St Germain of Rhode Island, chairman of the House Banking Committee, said that he would bottle up the IMF bill unless the Administration persuades the Republican-controlled Senate to act on an unrelated bill on low-cost housing.

The feeling in Washington is that the President will now have to pay a high political price to have his IMF bill passed. Speaking at the annual meeting last week, Reagan said that Congress's failure to pass the contributions bill would mean "a major disruption of the entire world trading and financial system--an economic nightmare that could plague generations to come."

To ease the organization's cash crisis, IMF Managing Director Jacques de Larosiere tried to arrange a loan of about $6 billion from European members and from Saudi Arabia. The loan has been held up, however, because the lenders fear that it would take the pressure off Congress to act. But the loan will probably be agreed upon at a meeting in November. Playing what one IMF aide calls the "last card," the fund decided the week before the annual meeting to suspend negotiations on new loans to needy countries. Even when lending resumes, many nations are likely to find problems. Since 1981 each member has been able to draw 150% of its quota once a year, with a maximum of 450% over three years. The IMF'S policymaking committee last week decided that drawings on quotas will be reduced to between 102% and 125% for cash-starved countries, and they must agree to apply tough austerity programs. This file is automatically generated by a robot program, so viewer discretion is required.