Kenneth W. Dam, a law professor and former top State Department official, will be nominated to become deputy secretary of the Treasury, the White House announced yesterday.
Dam, 68, has associated himself with some tough criticism of the International Monetary Fund and its bailouts of countries in financial crisis. His nomination to the Treasury's No. 2 post is the latest in a welter of signs that the Bush administration will be considerably more reluctant than the Clinton administration to favor giving the sort of giant rescue loans that went to Mexico, Indonesia, Russia and Brazil during the 1990s.
Financial markets and economic policy experts have been closely watching the new administration, and particularly the Treasury, to see where it stands on how to handle financial emergencies. The Clinton administration won praise from many economists for using the IMF to help keep the crises in Asia and
elsewhere from deepening into a worldwide disaster. But the strategy also drew attacks from critics who complained that the fund's loans ended up saving rich investors and lenders from the consequences of their mistakes, increasing the likelihood of more reckless lending and investing that could engender future crises.
If confirmed by the Senate, Dam would be positioned to play a crucial role in influencing the policy of the United States, the dominant member country in the 183-nation IMF. The Treasury is the direct link between the U.S. government and Washington's representative on the fund's executive board.
The announcement of his nomination closely follows that of John B. Taylor, a Stanford University professor who once advocated abolishing the IMF, as Treasury undersecretary for international affairs. Bush's chief economic adviser, Lawrence B. Lindsey, has also taken a dim view of IMF bailouts.
Other current and prospective administration officials may be more favorably disposed toward providing large-scale official aid rather than risk meltdowns. One is Peter Fisher, who according to administration officials is in line to be Treasury undersecretary for domestic finance. The State Department also is traditionally inclined toward providing help to almost any financially strapped country of some geopolitical importance, and the Bush team has said it wants to integrate foreign policy more closely with economic policy.
Dam's government career has been closely tied to that of George P. Shultz, who as White House budget director in the 1970s brought Dam to Washington. In 1982 Shultz, then secretary of state, made Dam his deputy.
Shultz shocked the economic establishment in 1998 by advocating the IMF's elimination. That year he and Dam published an updated version of an earlier book they had written together, "Economic Policy Beyond the Headlines," which included some blistering language about the IMF's failings.
"A major, IMF-generated problem -- perhaps an international monstrosity -- may well be the result" of the more than $100 billion in loan packages that were marshaled in Asia, Shultz and Dam wrote. "Against the background of the Mexican rescue and now the much larger East Asian bailout, emerging market borrowers and especially developed country lenders are being convinced by experience and observation that they will be bailed out in case of big trouble.
They can say to themselves, 'Heads I win, tails you lose.'"
A later indication of Dam's views comes from his role as a member of a Council on Foreign Relations task force that in 1999 examined ways of making the global financial system less crisis-prone.
During the task force's discussions Dam did not advocate abolishing the IMF, but he did favor substantially scaling back the fund's activities and limiting the size of its loans, according to other members. He signed on to the group's report, which proposed that the amount of IMF rescues be capped at levels well below the tens of billions of dollars provided in a number of cases in the 1990s, except when the stability of the global financial system is at stake.
Dam, a Kansas native, graduated from the University of Chicago law school, and in 1960 he joined its faculty, where he has served until recently. He was a vice president at International Business Machines Corp. from 1985 to 1992, and he has written a number of books, most of them combining law and economics.
The White House also announced yesterday that Roger W. Ferguson Jr., vice chairman of the Federal Reserve Board, has been nominated to serve as a board member in a term that ends in 2014. That move, which administration sources had previously said was in the works, will enable Ferguson to complete his four-year term as vice chairman.
Initially named to the Fed in November 1997 to fill an unexpired term that ended in January 2000, Ferguson became vice chairman in October 1999. He was renominated to his board seat by President Bill Clinton last year, but the Senate failed to act on the nomination.
- 194 World Financial Institutions