Opening Statements of Committee Members

Opening Statement of Subcommittee Chairman Connie Mack (R-FL)

Hearing on S.1879 - "The International Monetary Stability Act"
10:00 a.m., Tuesday, February 8, 2000

Good morning.

First I'd like to thank Assistant Secretary Truman for appearing before the Subcommittee today.

Until last year, Secretary Truman was for many years the Federal Reserve's leading expert on international economic issues.

I think this background makes you uniquely qualified to testify on these matters.

In the 1980s the foreign policy of the United States was dedicated to spreading freedom and democracy. Now it's time to spread sound money.

If freedom and democracy are to remain secure, people need to have rising standards of living. And to accomplish that, sound money is essential.

Early last year, then-Argentine President Carlos Menem announced Argentina was considering dollarization. Interest in dollarization immediately spread throughout Latin America.

In response to this interest, we held two hearings on dollarization last year.

These hearings convinced me that dollarization is not an economic panacea and is not an excuse to avoid other reforms. But it is a good way to achieve sound money. And sound money is essential for strong long-term economic growth.

Dollarization will reduce inflation and interest rates and spur savings and investment.

These two hearings also convinced me that the issue of currency profits has to be addressed.

Even if a country decides the economic benefits of dollarization outweigh the costs, it may refrain from dollarizing because of the transfer of currency profits to the United States.

As an elected representative, I understand quite well that the opponents of dollarization may claim the loss of currency profits will have to come out of needed government programs.

That is why I introduced the International Monetary Stability Act. This bill will give the Treasury Secretary the discretion -- and I emphasize discretion -- to rebate currency profits to countries that dollarize.

The bill is designed to appeal to both dollarization-supporters and dollarization-skeptics.

Dollarization supporters get to remove the loss of currency profits as a roadblock to dollarization.

Dollarization-skeptics should understand that the decision to dollarize remains each country's to make for itself. The United States will not impose dollarization on anyone. And we won't share currency profits unless the Treasury Secretary thinks dollarization will be successful.

Sharing currency profits will not be a "seal of approval" for all of a country's economic policies. It will simply indicate that sharing currency profits with a country is in the interests of the United States.

In effect, this bill lets the U.S. export the principle of price stability.

The dollarization issue is much too important for the United States to stand by passively. If the U.S. refuses to take a position, dollarization will continue to be considered only by countries in crisis, rather than being an option they consider during relatively stable times.

Back in 1992, Treasury Secretary Summers, then with the World Bank, said that "finding ways of bribing people to dollarize, or at least giving back the extra seigniorage that is earned when dollarization takes place, ought to be an international priority."

"For the world as whole," he said, "the advantages of dollarization seem clear to me."

When I asked him about this at the hearing last April, his only caveat was that as a Treasury official he now had to be more cautious about how the U.S. spends its revenue.

I believe this concern can be addressed and that the bill will be "scored" as a revenue gainer for the United States.

It is also important to note that I welcome suggestions and recommendations about the bill from other offices on Capitol Hill, the Administration, the private sector, and even from abroad.

Secretary Truman, we are delighted that you're here and look forward to your comments.