Treasury Secretary W. Michael Blumenthal said last night that the next needed step to be considered in international monetary cooperation should be closer and regular ties between private bank loans and official scrutiny by the International Monetary Fund.
In a speech in Tokyo and released here, Blumenthal said there is no alternative to a continued predominant role for priave bank lending to assist government borrowers, even though IMF resources must be increased.
But he raised the question "whether there is legal and practical scope for earlier involvement by the IMF."
In an address to the International Monetary COnference, a private gathering sponsored by the American Bankers Association, Blumenthal also called on Japan, West Germany, Switzerland and the Netherlands to follow the U.S. shift from a large current account (trade and services) surplus in 1976 to an estimated $10 to $12 billion deficit this year.
The central theme explored by Blumenthal was how to cope with the financing of deficits caused by Organization of Petroleum Exporting countries surpluses, which he said will be a long-term problem, demanding a strategy for the longer pull.
He discounted concerns that private banks, which have been financing about 75 per cent of the oil-consuming countries's deficits, could be placed in jeopardy by declining creditworthiness of the borrowing countries.
"I see no evidence that the system as a whole is overloaded," Blumenthal said.
The problems - and there are problems - are found in a few individual nations which are approaching or have reached the boundaries of prudence." He did not identify them.
The key problem, Blumenthal said, relates to the ability of banks "and the bank regulators looking over their shoulders" to ascertain the ability of government borrowers to service their debt.
"Without putting the IMF in the credit-rating business." Blumenthal said, there might be a way of bringing that agency into the picture. His suggestion follows on one made a few weeks ago by Federal Reserve Board chairman Arthur Burns that central banks in each country agree on the kind of information a borrowing country could supply to lenders.
But "to invite discussion," Blumenthal that went further by tossing these ideas on the table without endorsing any one of them:
The "least dramatic step" could be IMF willingness to provide private banks with now confidential staff reports and country assessments, if the countries in question approve. Or, reports on such countries could be published, again if approved by those involved.
A more overt role would be IMF staff participation in the development of conditions for private loan. This would parallel the current approach by the IMF when considerin an official loan. A variation on this theme might require a country to establish eligibility for borrowing from the fund as part of a negotiated loan package.
The IMF might participate in mixed financing packages - a blend of public and private funds. A variation of this would be IMF participation in re-scheduling private debt.
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The Treasury Secretary conceded he was raising "basic questions of how the IMF should operate," and that the international community might in the end decide such changes are not wise.The IMF last night itself had no comment on the speech.
Blumenthal's rationale for the proposal was the need for a closer relationship between the private market and official IMF financing.