Clinton Suggests New Global Fiscal Plan

In a bid to assert U.S. leadership amid the worsening global financial crisis, the Clinton administration on Friday readied a series of far-reaching but vague proposals for the world financial system, including a possible line of credit to rescue emerging nations from economic disaster.

President Clinton suggested that a “new mechanism” be created within the much-criticized International Monetary Fund to help limit turmoil in the beleaguered emerging nations.

Officials later explained that such an approach might, in effect, mean a new line of credit for countries under financial siege.

Clinton also proposed an expanded crisis mission for the World Bank and other international lenders, which would develop the ability to provide funds quickly to developing nations when financial emergencies strike.

The president spoke amid worsening conditions here and abroad.

A report on Friday that U.S. job creation slowed abruptly and the unemployment rate rose slightly last month underscored the peril posed by the deterioration of economies in Asia, Russia and Latin America.

“This country has got to lead. . . . We’ve got to stay on the balls of our feet,” Clinton said in his second urgent statement on the world economy in two weeks. “We can lead back from this financial precipice, but we need the resources to do it.”

And in an exasperated tone, the president repeated his administration’s call for Congress to approve $18 billion in funding for the IMF, which has been financially drained by bailout expenses in Asia and Russia.

“I have been asking for this for nearly a year now,” Clinton told reporters on the South Lawn of the White House before departing on a trip to Cleveland. “The crisis overseas has continued to intensify. This is inexcusable.”

The latest White House statement comes as Washington plays host to an invasion of financial officials from all over the world. The Group of 7 leading industrial nations, the IMF and World Bank all have major meetings planned in the coming days.

The new U.S. ideas, which officials acknowledged are incomplete, will be discussed today by finance ministers and central bank presidents of the G-7 nations: the United States, Japan, Germany, France, Britain, Italy and Canada.

If U.S. officials win backing for the ideas, they will then go to the annual meetings of the 182-nation IMF and its sister lending agency, the World Bank, scheduled to begin Sunday.

U.S. officials are quietly pursuing plans to help Asian nations restructure corporate debt. The U.S. agenda also includes proposals for a larger private-sector role in financing bailouts, fuller disclosure of financial conditions within developing nations and ways to encourage U.S. exporters to keep up business in some of the beleaguered regions.

Treasury Secretary Robert E. Rubin elaborated slightly Friday on the president’s proposals for a new emergency mechanism that would be placed under IMF control. Under the concept now being debated, such an approach would not come with a specific price tag, but would enable the IMF to provide as much money “as situations warranted,” he said.

“The idea was to try to get ahead of the contagion and to provide what in effect you might think of as almost a line of credit in a way that countries could call on when they need it,” the Treasury secretary told reporters at a news conference. “This mechanism . . . hopefully will be put in place relatively quickly and help us deal with the current crisis.”

One concrete step expected any day, however, is IMF action to help prop up Brazil with an infusion of $25 billion to $30 billion.

Rubin repeated his support Friday for aid to Brazil, where the currency is under pressure and U.S companies have more than $35 billion in investments.

Brazil’s central bank president, Gustavo Franco, said the government is poised to cut spending sharply to narrow a budget deficit in return for IMF aid.

He vowed not to restrict capital outflows or devalue the currency.

It was a measure of the nervousness in financial markets that Rubin’s remarks on Clinton’s initiatives sent the market plunging for a brief time when Rubin did not, as some had hoped, announce a Brazilian package.

By day’s end, stocks had recovered to finish up 152 points on the Dow Jones industrial average after two days when blue-chip stocks had fallen by a total of 450 points.

The 22 nations meeting Monday are expected to release a series of recommendations, including greater IMF openness, pushing countries to release better and more timely data about their economies, improving banking regulations and forcing multinational banks and wealthy investors to bear more pain when investments in emerging markets suddenly go bad.

Today, G-7 leaders are expected to take up the crisis facing Japan as it seeks to address a banking crisis and its worst recession since World War II. Japan, meanwhile, is expected to unveil its own $30-billion aid package for Southeast Asian nations.