Federal Reserve Chairman Alan Greenspan said Thursday that the continuing currency crises in Southeast Asia will have a "modest" effect on the U.S. economy.
Exports to Thailand, the Philippines, Indonesia, Malaysia, Taiwan, Korea, Singapore, and Hong Kong will slow during the coming year, Mr. Greenspan told the House Banking Committee. This could hurt corporate earnings because these eight countries receive 16% of U.S. exports.
The Fed chairman also reiterated his call for the United States to help correct these Southeast Asian economies.
"We need to work closely with their leaders and the international financial community to assure that their situations stabilize," Mr. Greenspan said. "It is in the interest of the United States and other nations around the world to encourage appropriate policy adjustments, and where required, provide temporary financial assistance."
But several members of the Banking Committee questioned whether U.S. intervention is warranted.
"We are being asked to bail out countries that are corrupt in nature," said Rep. Joseph P. Kennedy, D-Mass.
Rep. Bernard Sanders, I-Vt., maintained that a Treasury Department plan to help Indonesia would violate a 1994 federal law that prevents economic assistance to countries that do not guarantee workers' rights. "It is illegal," he said. "I intend to do all I can to stop it."
Housing Banking Chairman Jim Leach, however, defended the U.S. plan, saying these types of crises can swiftly spread to affect the global economy. "The quicker and stronger the medicine applied, the greater the likelihood any damage can be controlled," the Iowa Republican said.