Press Briefing by Treasury Secretary Robert Rubin, National Economic Advisor Gene Sperling, and Deputy Treasury Secretary Larry Summers

The Briefing Room

12:09 P.M. EDT

MR. SPERLING: As the President just announced today the leaders -- heads of state of the G-7 nations released a statement dealing with both short-term and long-term steps to address the financial crisis affecting much of the world. The act of the leaders themselves, issuing and agreeing on a leaders' statement outside of the context of the annual G-7 meeting is itself a virtually unprecedented step, yet extraordinary times require this type of extraordinary focus by the leaders themselves.

As you know, and as Secretary Rubin, Deputy Secretary Summers will discuss, the President has been focused on both the long-term architecture issues and the more immediate international economic issues for several years. As you know, these efforts have intensified as the situation in the world economy has become more serious. And as you know, on September 14th the President laid out a variety of steps in his Council on Foreign Relations speech. On October 2nd he also gave a departure statement in which he talked about several of the measures that were adopted today, including a precautionary facility at the IMF and emergency lending facility at the World Bank as well. Then on October 6th he spoke to this and other issues at the World Bank/IMF meeting.

This statement grew out of a series of phone calls between -- that started between the President and Prime Minister Blair. They spoke -- have been talking in some form about the appropriate need for leaders' attention and agreement for a couple of months. They've had at least five calls that at least in part have addressed this issue, between October 2nd and October 12th on this. Over the last couple of weeks, as Treasury Department officials have worked with their G-7 colleagues, the President has spoken to most of his counterparts, including yesterday his final conversation from Cape Canaveral, where he spoke actually twice with Schroeder from Germany.

With that, I will turn it over to Secretary Rubin to go through a little more on the contents and background of the statement.

SECRETARY RUBIN: Thank you, Gene. I think of this as a process that began several years ago, when the President of Naples called for the G-7 leaders to focus on what we now call the architecture of the international financial markets. He very rightly said that we've entered a new world and we need to adjust the architecture to meet the needs of this new world. And there was some significant developments out of that, as you remember, that came to be called the Halifax Reforms. A lot of it revolved around transparency.

About a year ago the President charged the Chairman of the Federal Reserve Board and me with working with our counterparts in industrial countries and emerging market countries to greatly heighten the focus on these sorts of issues and work toward an architecture that was as modern as the markets. And then as Gene said, just before the beginning of the World Bank meetings/IMF meetings that took place recently in Washington the President called for a precautionary facility and also called for an emergency facility at the World Bank to deal with social safety net needs and financial restructuring needs.

This is an enormous -- particularly over the course of the past year -- an enormous heightening of focus on preparing the global financial markets, or preparing the structure, the regulatory and other structure dealing with the global financial markets, for what the modern global financial markets have become.

Let me very briefly touch on a few of the highlights in these statements. You've just received them and obviously all of us will be available all day long to respond to questions as you've had a chance to take a look at them.

The first is the leaders' statement, and what it begins with is a statement of the developments over the last few weeks, and there really have been some very significant developments. I at least think that in some part they stem from the heightened shared concern and the heightened energy around these issues, the financial crisis, that came out of the President's speech several weeks ago in New York when he first called for a shifting of the -- a focus on the shifting of the risks from inflation to growth and stability. The G-7 statement that came after that, the G-7 finance minister central bank governors' statement came after that. And then all of the meetings -- the World Bank, the G-7, and other meetings that took place a few weeks ago in Washington.

In any event, this statement sets out the significant developments of the last few weeks. The congressional approval of the IMF quota, which provides $90 billion of new resources, the passage of bank reform legislation in Japan, the greater focus on growth in Europe and the United States and the corresponding reduction in interest rates, policy commitments by Brazil, and progress made in a number of countries in Asia.

There is then in the leaders' statement an agreement on the broad outlines -- this is now looking forward -- the broad outlines of the precautionary line of credit, or precautionary facility, the President called for just before the beginning of the IMF/World Bank meetings; and also an agreement on the emergency facility at the World Bank which he called for again just before the World Bank and IMF meetings; and also agreement on the increased use of financing tools at the World Bank to catalyze private sector flows, that is to say, credit enhancement facilities. And I believe there has now been one such transaction done. It's a very important area that's gotten no focus.

Then you go on to the leaders' statement and it talks about agreement on various measures that come out of the work that has gone on between the industrial -- the G-7 industrial countries, others of the industrial countries, and various emerging market countries over the course of the past year, which has resulted to some extent in proposals that are ready to be implemented and to some extent an identification of areas for further work.

And the leaders' statement then goes on in its next section to talk about extending the reach, which is the phrase the President used as you may remember in his remarks before the -- I believe it was either at the IMF/World Bank meetings or in the statement he made before then -- extending the reach with respect to architecture -- no, actually, it was the Council on Foreign Relations I think is where he used that phrase -- extending the reach -- that was his speech in New York several weeks ago -- extending the reach with respect to architecture. And it goes into the areas that need focus going forward.

And, again, just to highlight a few: strengthening prudential regulation in order to promote safe and sustainable capital flows; strengthening financial systems in emerging markets; this whole very complicated question of exchange rate regimes; new or better ways to prevent and respond to crisis, including new forms of official finance and an appropriate role for the private sector. And that goes on.

If you put it all together I think what you have -- and I'll use a phrase that Gene used -- you have, at least in recent times, unprecedented coming together of the G-7 countries reflected in the G-7 statement and in this finance ministers central bank governors' statement, which provides a lot more detail on all of this, to focus on this very central issue for the world economy, which is not only the immediate crisis that obviously is extremely important, but also an architecture for the future.

And finally we have an agreement by the executive directors at the International Monetary Fund to promote reform at the International Monetary Fund. And what this agreement does -- and it's a memo from the various executive directors to the managing director -- is to agree to promote the reforms that we had worked out with Congress in getting passage of the IMF legislation. And once again, it is the G-7 coming together, coalescing around a forward-looking program with respect to reform, in this case at the IMF.

And with that, all of us would be delighted to respond to comments or questions.

Q: Could you say how this precautionary line of credit is going to work? Are you going to preapprove a group of countries? Is it a case-by-case basis? And is it likely to be used for Brazil?

DEPUTY SECRETARY SUMMERS: The full modalities, of course, will be worked out by the IMF board. Certainly it would be on a case-by-case basis and certainly it would be dependent on a country pursuing policies that -- committing to policies that could be approved by the IMF.

Some of the ideas involved with contingency finance could possibly find application in Brazil, although that, of course, will depend upon how the situation in Brazil progresses. And whether this framework would find application would depend upon the timing of various decisions and so forth. But I think the key idea is that there is the prospect of finding finance in the form of a credit line that is contingent so as to provide a reinforcement to confidence and the kind of backstop that could support the normal flow of private sector capital.

Q: Can you explain how this is different from what currently is being done? And does this involve any additional money beyond the $90 billion approved in the quota?

DEPUTY SECRETARY SUMMERS: There is no commitment of finance to the IMF beyond what's contained in the quota. I think the statement does reference the possibility that in particular cases IMF financing could be supplemented by bilateral financing used in this way.

What this does is -- what this proposal does is build on the innovation, the very important innovation of last year, the SRF, which provided for large quantities of finance relative to a country's quota to be provided on a conditioned basis at higher than normal interest rates on shorter than normal terms, in order to be a backstop to provide confidence.

That contemplated a case in which it was necessary -- the SRF contemplated a substantial flow of funds to a country, as was done, for example, in Korea. Here what is contemplated is the possibility of doing that on a contingent basis, where funds would be made available, but would only be drawn if the need arose. And so where there is evolution is in the provision of contingent finance at premium interest rates. It's really building on the SRF idea.

Q: There's a reference as far as the precautionary line of credit goes to the notion of "appropriate private sector involvement." What does that mean? What might it mean?

SECRETARY RUBIN: It means private sector involvement that's appropriate. (Laughter.) Maybe I went too far and was too specific in responding, but that's the -- that will be decided on a -- one of the two statements, either the ministers' statement or the leaders' statement -- I think it's the ministers' statement -- says that's on a case-by-case basis.

Oh, the private sector piece? I'm sorry, I was thinking of the bilateral piece.

On the private sector piece, one of the issues that will have to be dealt with in any one of these situations is what role should the private sector play. And the reason it said, appropriate private sector participation is that it's a complex issue and will depend on the facts of the individual situation.

Q: One other aspect, too, again, on the precautionary line of credit. There's also the notion here if the countries involve adopt strong IMF-approved policies, if you will, as a condition for our help here, what about ongoing problems that may surface, for instance, in Russia, where there are still questions about them living up to the existing terms?

SECRETARY RUBIN: Russia is a totally different situation, as Larry Summers very well said. This is being put in place -- of course a new facility is being put in place -- well, are you now talking about the precautionary facility?

Q: Yes.

SECRETARY RUBIN: Yes. It's being put in place for a situation where while there may be problems in an individual country, for example, a country may have fiscal problems or other problems, the predominant problem is contagion, the predominant problem is outside. I don't think you could characterize the Russian situation as that.

Q: Mr. Secretary, on the precautionary line of credit, how soon is it envisioned that this plan is going to be implemented? Do you expect it by the end of the year?

SECRETARY RUBIN: Well, it has to go to the board and I'm not sure when that is likely to be. Do you know, Larry?

DEPUTY SECRETARY SUMMERS: I'd say in the near future.

Q: Is it pretty likely that Brazil is going to be the first case, the first application?

SECRETARY RUBIN: Well, without going beyond where we are in Brazil, without commenting what will happen with respect to Brazil, Brazil is a situation in which there has been a strong reform program. There obviously are issues that still need to be dealt with, and that's what President Cardoso and Finance Minister Malan spoke to the other day. And Brazil obviously is being affected by contagion in the rest of the world.

Q: Do you have any concerns that Brazil's reform program may be over-ambitious, or do you think they can accomplish what they have set out this week to accomplish?

SECRETARY RUBIN: Well, they have committed themselves to accomplish what they think they need to do in order to deal with the problem, the fiscal problem that they have. And obviously it's very important that they do this effectively and do it with reasonable dispatch.

Q: Mr. Secretary, are you at all concerned that this type of financing will represent some kind of loosening, in some sense, of IMF conditionality, in the sense that when a country gets this type of line of credit there's really no way you can kind of hold a gun to their head to follow through on the commitments they've made. So how does that work?

SECRETARY RUBIN: It's a good question. Let me ask Dr. Summers to respond.

DEPUTY SECRETARY SUMMERS: That's obviously a crucial issue, and while all the procedures have not been worked out, they will be worked out by the IMF board in the near future. Certainly we would anticipate that any drawing from this facility or mechanism would require the approval of the IMF board on the basis of review by the IMF staff of the appropriateness of policy that was being pursued. So there is no money here that is committed without regard to the policies that a country is pursuing for exactly the reason you stressed in your question, which is the importance always of making sure that financial support is well utilized, which depends upon the policy framework.

Q: Mr. Secretary, two questions. One, just following up on that point. Once this contingency line of credit has been established for a country, how do you ever withdraw it if they start to behave badly without sinking that country's financial condition? Second is, you mentioned the possibility of bilateral aid. Everybody wonders, is there going to be bilateral aid for Brazil? Will the United States participate? And how much?

SECRETARY RUBIN: Well, let me just answer the second question first. What we have said on Brazil -- and I've said it many times before, so I'm just repeating myself -- is that Brazil has done a good job with respect to reform, though clearly there are issues that need to be addressed, and that was precisely the point of the President and Finance Minister's speeches the other day, that the international community has a very large stake in Brazil being successful. And as a consequence, it wants to be helpful with respect to Brazil. And that beyond that it is probably not appropriate to venture comment until there is something to venture comment about.

On the first part of your question, the answer is that you're basically talking about countries that have had good reform regimes, as Larry Summers said. There will have to be IMF approval before each tranche is taken down, and clearly it's expected the countries involved in this regime will continue to stay on a strong reform program. If they don't, then you create a whole different set of circumstances.

Q: How do you deal with that? In other words, if they start to backslide --

SECRETARY RUBIN: Let me give you my response and let Larry either supplement it or say it seems about right. It seems to me the right answer --

DEPUTY SECRETARY SUMMERS: A rather narrow range of choices you gave me. (Laughter.)

SECRETARY RUBIN: Let Larry say that it's right. (Laughter.) No, look, I think the answer is like any situation like this. If a country doesn't continue -- if a country is not on an appropriate reform track, then the IMF has to deal with what is a very difficult situation, and we know they've had some situations like that to deal with.

DEPUTY SECRETARY SUMMERS: The Secretary's answer is absolutely correct -- (laughter) -- in my view. In any IMF program or indeed in any financial support effort -- the support program that the United States and IMF were involved in providing for Mexico would be another example -- there is the possible provision of finance and the finance is not guaranteed. The finance will not be provided if the conditions are met. And that situation is the same whether it is a commitment of a future flow of finance, as in a standard IMF tranche, or the availability of a contingent flow as in the case of this new facility. And obviously it's important to the maintenance of confidence that negotiations take place and that countries pursue strong policies.

Q: Are we sending $1 billion in food aid to Russia?

SECRETARY RUBIN: Before we answer, let me make one comment on something else just because it strikes me nobody has made it yet. Although these comments very rightly -- the questions have been predominantly focused on this precautionary facility and other rather immediate matters, I do believe this is a very, very significant set of statements.

I think what you see is a framework, and it's a framework within which the international community is going to be working for a long time to come in trying to set in place the architecture, if you will -- the architecture for these global financial markets. And I do think that it is really a very -- I would say an immensely important event to have the G-7 leaders coming together around this framework. And it represents a tremendous amount of work.

I might add, in that respect, that Gordon Brown, the Chancellor Exchequer in Great Britain deserves great credit for having quarterbacked -- Great Britain, as you know, is head of the G-7 this year -- for having quarterbacked this effort that all of us worked so hard on over this now past few weeks to bring together this statement that reflects the work of the past year.

The Russia question I'll ask Larry Summers to respond to.

Q: Can you describe for us what's involved in $1 billion credits to Russia?

DEPUTY SECRETARY SUMMERS: Only that my understanding is that Agriculture Secretary Dan Glickman is pursuing that issue and the opportunities that it represents for American agriculture and the very serious issues that are involved in supporting Russian agriculture. But I don't have any other details for you.

Q: Deputy Secretary Summers, if I could, I'm still a little confused on how this might differ from the SRF. If the IMF board still has to approve the funds once there's a request for them, is it -- in working practice does it seem to be more of a situation with how quickly you can respond or --

DEPUTY SECRETARY SUMMERS: The differences may go to the speed of response, the precise procedures for board approval, and the nature of the tranching arrangements, which on standard IMF programs tranches are provided on fixed schedules, whereas the availability of a credit line would involve approval required for disbursement, but somewhat more discretion about the timing than is associated with the normal IMF program approach.

Q: So the country would just write a check when it needed the money?

DEPUTY SECRETARY SUMMERS: No, there would be a set of -- I mean, we're trying to describe a quite complicated set of scheduling that would be designed in each particular case with regards to that circumstance. But there would be -- with the requirement that all drawings had to be approved by the board, there would be more flexibility -- that's what you mean by saying it's a credit line -- there would be more flexibility as to the timing of drawings than is the case in a standard IMF program which prescribes specific timing following specific reviews.

Can I take advantage of the fact that I'm here to just highlight one other thing that I think that the Secretary mentioned, but I think bears emphasis. And that's the statement of the G-7 executive directors, which embodies and states as G-7 approach to pursue in the IMF a number of important architectural improvements that are things that we've worked very hard on and that we've worked very hard on in conjunction with members of Congress in both political parties in the course of the discussions of the IMF funding.

And those really go to a number of areas, perhaps most crucially to transparency and accountability of the IMF, where the G-7 will be taking the position that there needs to be a presumption of release of information unless there's a compelling reason to the contrary and to external evaluation; and where also there is an agreement that IMF loans need to, in their conditionality, address a range of critical issues for creating a market economy, including restrictions on trade and, in particular, government-directed lending and other subsidies; and third, a recognition that in cases where large amounts of finance are provided, it is appropriate that that be -- this was the idea behind the SRF -- that it be on a short-term basis and at premium interest rates.

And that reflects a lot of ideas that came to the fore in the course of our working on the IMF this year with political leaders in both parties.

Q: Mr. Secretary, there seems to be a lull in the crisis at the moment. Do you believe that the crisis has been stemmed? Have we turned the corner? And, if so, what role would you credit the G-7 in such an action?

SECRETARY RUBIN: I don't have a crystal ball and neither does anybody else, whatever claims they might make. I do think that these are problems -- and I've said this before -- that have developed over a long period of time. I think it's going to take time for the world to work its way through these problems. I think there are many challenges ahead. I think there will be ups and downs.

I do believe that through a very tumultuous period, that in large measure the international community has been on the right track. The key has been for each of the participants, each of the countries, each of the international financial institutions, to do what they need to do. And in the last few weeks you've seen some of that come together a little better in some respects than it had in the past, though in other respects it's come together pretty well right along.

For example, in Korea, I think the international community functioned very effectively for its part, and the Korean government, in terms of implementing reform, functioned very well for its part. In other cases, such as Indonesia and Russia, you had sovereign political systems that didn't take hold overtake ownership of reform.

I think that the last few weeks, as I said at the beginning of my remarks, there have been some significant developments, and I think that is very important on the one hand; on the other hand, I do believe it is going to take time for the world to work its way through this. I think there are many issues and many challenges going to be met going down the road. And I think the key is for each of us to continue doing what needs to be done for the world to work its way through this set of problems.

Q: Do you think the contagion itself has been stopped? Do you it's been stopped --

SECRETARY RUBIN: I would give you same answer that I just gave you: I don't think anybody has a crystal ball. I think what you can say -- at least I feel we can say with some strength --is that there has been broad-based and I think a strong program in place in the international community since this thing first erupted in Thailand. And there is a lot of work left to do. And the key is that each of us to our part. And if we do that, I believe the world will work its way through this and we'll return to stability and growth in the areas that have been affected and the contagion will diminish and then eventually go away.

But I can't tell you how long it's going to take to get to that point, and I can't tell you what the ups and downs will be between now and then. I think the key is for each of us to do our part and to work toward the day when this is over.

Q: Mr. Secretary, given that the funding that was just approved --

SECRETARY RUBIN: But there is a lot of hard work ahead, and I don't think any of us should lose sight of that.

Q: The funding for the IMF that was just approved by Congress was initially requested over a year ago when the world economy was a very different place. Is there any discussion within the administration about the possible need to request even more money for the IMF from Congress next year?

SECRETARY RUBIN: The answer to that is no.

Q: Why not? I mean, why would that amount have been needed a year and a half ago and it's no longer necessary to supplement that, when obviously IMF --

SECRETARY RUBIN: When we first discussed the quota negotiations, if you will, amongst the members of the IMF, we were looking to put in place funds that were sufficient to deal with what we thought then would be a relatively long period of time ahead. I think with the resources we have now, the IMF -- and the new arrangements to borrow, so you put the two together -- are well positioned, in terms of resources, to do what they need to do. But clearly, as I said a moment ago, there is a lot of work to be done.

Secondly, I think that we now have a somewhat broader view as to how these kinds of crisis situations can best be dealt with, and most particularly I'm thinking of the potential role for private sector involvement, although that's a very complicated issue, and as I said a few moments ago, will have to be dealt with on a case-by-case basis. But I think the IMF is now in a strong position to deal with what lies in front of it.

Q: Mr. Secretary, it seems to be that everybody recognizes Brazil is doing the right thing, so what does it need to do to be the first country to benefit from the new mechanism and the new architecture? And will the financial package -- international package, supposed to be announced next week, be a part of this new architecture?

SECRETARY RUBIN: Well, I think I'll stick with what we've already said. I think what President Cardoso and Finance Minister Malan had to announce this week is very important. And now the key is to get that implemented and implemented with relative speed. And the international community, as I said a bit ago, is very much of the view that Brazil is very important and has had a good foreign program over time. I think further discussions probably would be premature at this point.

Q: Could you explain why Brazil might be a candidate for this type of financing? I mean, when this was first announced by the President, the idea was that countries that were not yet affected by the crisis would get this to sort of insulate themselves.

SECRETARY RUBIN: No, I think I'd actually put it a touch differently, if I may. I think the basic concept was that there are countries where the fundamental problems -- where the fundamental issue is the problems in the country itself, although the contagion is also a factor. Then there are other situations where there have been good reform programs and the predominant problem is the contagion.

I think it would be fair to say that Brazil is a situation that has accomplished a great deal over the last few years. Just look at the inflation rate five years ago and look at it today, though clearly there are still issues to deal with, as we discussed a few moments ago. And Brazil was doing quite well until this contagion -- until the problems developed elsewhere and then you had the contagion effect that we've all talked so much about. And so Brazil is a situation where, in our judgment at least, the predominant problem is contagion.

Q: Mr. Secretary, on capital flow controls, can -- I'm a bit fuzzy on that.

SECRETARY RUBIN: On which? I'm sorry.

Q: The flow controls provisions of this. There was some mention of that. Does that represent -- just given the evolution of that issue over the last few months with the IMF meetings and so on, does this represent a G-7 consensus on controls or a consensus to seek a consensus?

SECRETARY RUBIN: No, there's no -- let me say my own view, and it's our view -- I think capital controls are not the right answer to dealing with financial instability. I think there are other kinds of issues having to deal with capital flows. For example, one of the ramifications of having -- an issue that's being examined by the financial markets working group now, which consist of the Chairman of the Federal Reserve Board, the head of the SEC -- the head of the CFTC chaired by the Secretary of Treasury -- is how does one think about these large private partnerships with respect to leverage and transparency.

And there are a lot of issues around capital flows that need examination. But we are not in favor of capital controls.

Q: Can you characterize how that issue fits into what you've announced today in terms of the G-7 breakdown on that? Because I know that France and Germany were pushing for capital flow controls and Washington and London were against them. Where does that stand now, basically, given what's happened today?

SECRETARY RUBIN: I think all of us agree that we need to figure out how to try to reduce what you might want to call the excesses in flows of capital. But that doesn't lead you to capital control. I'll give you an example of what I mean and I think it is quite accurately reflected in these statements.

Our view, my view, is that -- and I've said this before -- is that banks and investors in the industrial countries, as time went on, as good times persisted, became less and less focused on the risks that were involved in the credits they were extending and the investments they were making. And the consequence is that you had substantial excesses with respect to the flows into these developing countries, and those substantial excesses are an important part of why all this erupted.

One question is, are there ways to better stimulate appropriate focus on and weighting of risk in the industrial country banks and by industrial country investors during good times so the excesses of capital flows are reduced. That's the kind of thing that we at least had in mind when talking about sustainable capital flows.

Q: So, finally, has the U.S. ruled out considering capital flow controls, basically, as an option?

SECRETARY RUBIN: We do not believe that capital controls -- particularly the kinds of comprehensive capital controls that, for example, Malaysia has put in place -- are a sensible approach or an approach that's consistent with the long-term economic -- promoting long-term economic growth in the global economy.

Q: Would a country get any money up front when they agreed to this credit line? Would there be an initial cash injection?

DEPUTY SECRETARY SUMMERS: It would be dependent on the specific case, whether this credit line stood alone, whether this credit line came in conjunction with IMF support through other modalities. And so I don't think it's possible to give a general answer to that question.

Q: Can I ask one more -- a question on one of the sections about future efforts that the finance ministers are now working on that talks about considering the elements necessary for maintenance of sustainable exchange rate regimes in emerging markets, including macro-policy, to promote stability to individual countries. What are you getting at there? Is there some question on the wisdom of these fixed exchange rate regimes?

SECRETARY RUBIN: I think it speaks for itself. (Laughter.)

DEPUTY SECRETARY SUMMERS: Well, I think that many analysts who have looked at and examined recent events have seen exchange rate issues as very much related to those events -- some because of exchange rates that they've seen as being excessively rigid; some because of exchange rates that they've seen as being excessively flexible. And I think clearly, given the importance of these issues and given what we've seen can be the consequences of very serious problems in emerging markets, I think it's appropriate for the international community to think through what kinds of exchange rate regimes in what kinds of circumstances are most appropriate.

I doubt there will be a general, cookie-cutter solution that applies to all countries. But I think it's certainly a question that requires analysis and discussion. And in the past we've said that the -- we've noted often the trilemma, if you like, of reconciling independent macroeconomic policies, exchange rate objectives, and capital mobility. And how those need to be dealt with in particular cases will be the subject of discussion.

Q: I wanted to ask a question about collective action clauses, because that's something that was embodied in the work of the G-22 and it's here again. Why collective action clauses? And there has been some talk in the markets from people who have looked at the G-22 reports on the financial architecture, that that could actually exacerbate liquidity squeezes, make them worse, because investors would feel they couldn't depend on a bond contract and that they could be, instead of having everybody -- you could be outbid by a majority.

DEPUTY SECRETARY SUMMERS: The question of those clauses is something that obviously is going to need to be examined very carefully going forward.

In general, I think everyone who I've talked to in both the public and the private sector agrees on the importance in responding to these crises the desirability of cooperation between the private and the public sectors, particularly in situations where the problem becomes dominantly one of confidence. And no one regards it as satisfactory for public sector money to go in in order to enable private sector money to go out.

And what's necessary is to find the best approaches to cooperation. And often, that can involve something that many, many private sector participants see a very strong need for, which is ways of addressing free rider problems of the kind that unanimity clauses make it easy to generate. And so this is in the spirit of facilitating a well-functioning capital market by exploring types of clauses that are quite common in various kinds of commercial bond contracts.

But I think it is very important to emphasize that recognition that crises will come from time to time and need a response in no way detracts from the idea that a well-functioning international capital market has to be built on a foundation of debtors recognizing their obligation to meet their contractual debt obligations.

Q: Thanks very much.

END 12:48 P.M. EST