Treasury Secretary James A. Baker III said yesterday that "an awful lot more needs to be done" to improve the stability of the international monetary system, but carefully sidestepped the idea of a new monetary conference.
At a congressionally sponsored summit on exchange rates and the dollar, called to discuss the possibility of returning toward the fixed-rate system abandoned in the early 1970s, Baker warned that reforming international monetary rules is "not an overnight task."
Nonetheless, Baker's brief appearance, and the full participation of Deputy Treasury Secretary Richard Darman, gave the conference -- called by Rep. Jack Kemp (R-N.Y.) and Sen. Bill Bradley (D-N.J.) -- a semi-official status that its sponsors believe will improve prospects for a long-range strategy for the dollar.
At a meeting in Bretton Woods, N.H., in 1944, the world's finance ministers established the fixed-rate exchange system that governed international transactions until the early 1970s. Under that system, governments agreed to keep the value of their currencies within a certain range of the dollar. The United States, in turn, pegged the dollar to gold.
Since early 1973, when the fixed-rate system was scrapped, currency values have fluctuated widely, sometimes leading to trade and economic disruptions.
Baker told the conference there was no need for a new "Bretton Woods." But, he said, the International Monetary Fund's Interim Committee will consider two differing reports on the adequacy of the existing monetary system when it meets next spring.
"What we have begun to do here is to pressure our government to take more of a leadership role in this," Bradley told reporters.
Speakers at the first day of a two-day conference, attended by key financial figures from here and abroad, were split between the argument for the urgent need to do away with the current floating rate system, and the belief that even if greater stability is desirable, it is unrealistic to return to fixed rates.
But there was virtually unanimous praise for Baker's initiative in calling the Sept. 22 meeting of the Group of Five finance ministers -- representing the United States, Britain, France, West Germany and Japan -- who agreed to intervene in foreign exchange markets and take other steps to bring down the value of the dollar.
Bradley and Kemp praised the G-5 meeting as the first step toward a more systematic reform of the monetary system. Baker said the G-5 accord was "not a one-shot effort, but one part of enhanced cooperation" among the five powers.
Kemp said that he thought a consensus would emerge from the two-day conference and that there clearly is movement toward reestablishing some sort of "target zones" that would limit fluctuations of major currencies. Kemp also put in a plug for using the price of gold as a reference point for such target zones.
Several speakers predicted a major financial crisis unless steps are taken to reform the exchange rate system. New York banker Felix Rohatyn, for example, citing the accumulation of debt by the Third World and others, said, "It's very late in the day: We have turned the American markets into a junk-bond casino; we must take care that the world does not become a junk-bond casino."
But John Williamson of the Institute for International Economics suggested that "the exchange rate system has already collapsed under the threat of protectionism," and was in fact abandoned by the G-5 decisions, which recognized that prevailing exchange rates "were wrong."
Among those urging caution in opting for a changed system were Ludolf von Wartenberg of the West German Christian Democratic Union Party; Toyoo Gyohten of the Japanese Ministry of Finance; Rainer E. Gut of Credit Suisse; Salomon Bros. economist Henry Kaufman, and Brookings Institution economist Edward M. Bernstein.
"There is a nostalgic view that we can go back to fixed rates, forgetting all of the drawbacks that led us to drop the system," Kaufman said.
Bernstein -- a Treasury adviser during the original Bretton Woods conference -- said that "before we enter into international discussions on a new exchange system, we should know a great deal more about the kind of system we want and how we expect it to work." He also argued that if it is decided to change the system, the better way would be to use the existing mechanism of the IMF.