NEW YORK -- The weakness of the U.S. dollar is a sign that the world has voted and found U.S. economic policy wanting, former Citicorp chairman Walter Wriston said in an interview.

"In the collective world judgment," he said, "we haven't gotten our act together with an economic policy that makes a lot of sense to a lot of people."

Mr. Wriston is promoting his new book, "The Twilight of Sovereignty," which says technology will no longer let governments act without restraint from outside forces - in this case, currency markets.

Technology has created "a global plebiscite" or "an information standard," he said, in which the wide and immediate availability of news lets people and markets react simultaneously to a country's policies.

Conditions for Devaluation

A country's currency will be devalued if it "prints money and retreats into protectionism," Mr. Wriston said.

"Clearly, [the United States] has to have a fiscal policy where we don't increase spending every year by two times the rate of inflation," Mr. Wriston said. "We need a tax policy that fosters entrepreneurs, which is where jobs are created."

"We need a monetary policy that funds economic growth without inflation, foreign policies that attract capital, and regulatory policies that are good for business," he added. "Monetary aggregates should be growing at 3% to 4% a year. Lately, they have not been. It is clear that monetary policy should be steady, not turned on and off."

He also suggested spending cuts, curtailing new federal regulations, granting the President line-item veto authority, and passing a "Gramm-Rudman bill with teeth" to balance the budget.

A |Regulatory Recession'

He blamed Congress for spurring banking regulators to tighten and change rules, creating a "regulatory recession."

"Regulators want to play tough. Banks want to survive, and capital ratios are designed so banks can only buy government bonds. That is not very helpful," Mr. Wriston said.

He called the 1991 banking bill "a horror story" and criticized a provision that lets regulators review compensation levels for bank executives.

Another key point in Mr. Wriston's book is that the globalization of markets cannot be reversed by politicians. He said banks are mistakenly retreating from the global arena at a time when world liquidity is crucial.

Citicorp Termed |Truly Global'

"We have a pulling back of financial institutions in the global world at the very time when they are most needed," he said. The only truly global banking company remains Citicorp, he said.

"U.S. banks are under a lot of pressure from regulators," Mr. Wriston said. "People would rather banks make a bad U.S. loan than good foreign one."


Foreign banks also have chosen not to be a unselectively global, he added.

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