CONGRESS IS thinking about imposing new rules on the banks' foreign lending. But rules to do what? Legislation is likely, since the administration is now pressing Congress to authorize as soon as possible greater lending resources for the International Monetary Fund. But much of Congress regards the IMF loans as a kind of foreign aid, and some tightening of the banking rules is probably inevitable as the price of getting the IMF authorization passed. What would be most useful?
Most American bank lending abroad, first of all, finances American exports. Brazilians borrow U.S. dollars to buy things that they can't get for Brazilian cruzeiros. It's important to keep the trade connection in mind. Occasionally one congressman or another will suggest that it might be better if American banks did less lending abroad and kept the money safely here at home instead. The question to ask in reply is whether the congressman means that it would be better if those exports were not sold and the people who earn their livings in those factories were laid off. Not many congressmen, once they think about it, mean that. As for safety, the risks in bank lending here in the United States are by most measures greater than in foreign lending.
But it is now clear, in retrospect, that nobody-- not this country's government, not the borrowing countries' governments, not the banks themselves-- fully realized how much money was being lent, and how fast, in that last surge ending last year. It wasn't a matter of deceit or suppression. It simply turns out that the data collection system was incomplete.
The system is best run internationally. The errors and omissions are most reliably caught by people who have access to both the lenders' and the borrowers' figures. Why not the IMF itself?
The IMF has been working for the past couple of years on a greatly expanded program for tracking all international debt, including short-term loans, in detail. That operation is making progress, and there is now a prospect, for the first time, of having reliable monthly figures on who owes what to whom.
It would be a bad idea for Congress to try to write into law specific requirements for bank lending. If the requirements for foreign loans were more stringent than for domestic loans, they would discriminate dangerously against the most efficient and competitive American companies--those that produce for export. But it would not be such a bad idea for Congress to take note that the IMF will soon have more complete information than any government possesses. Nor would it be a bad idea for Congress to tell regulators to use it in overseeing the American banks.