Treasury Secretary James A. Baker III told...

Treasury Secretary James A. Baker III told Congress that he strongly disagrees with proposals to forgive some of the Third World’s debt, now more than $1 trillion. “I believe this path leads both debtors and creditors off the cliff,” he said. “This approach would irreparably politicize the debt problem.” Forgiveness would distract both debtors and creditors from the need to make reforms, encourage repudiation of debt and shift the risk on bank loans to taxpayers, including U.S. taxpayers, he added. “I simply cannot endorse such schemes,” he told the Senate Appropriations subcommittee on foreign operations. He argued for a U.S. contribution to increase the capital of the World Bank, the largest single source of aid loans to Third World countries.