The Asian Crisis: The Rubin Rescue

• Share

It tells us something about the new world order when the global battles America is fighting are less about the balance of power than about the balance sheet. We gauge our vital interests not by which boundaries we will defend but by which currencies. And the meetings that matter most don't always take place in the soundproof White House Situation Room; some are held in a private dining room at the Jefferson Hotel.

That's where Treasury Secretary Robert Rubin met on Dec. 18 with Federal Reserve Chairman Alan Greenspan and their top aides to craft a new approach to the Korean credit crisis, which they had long underestimated, at least in public. The three-hour dinner was a turning point in a months-long U.S. journey from backroom player to more visible leader in a global effort to solve the financial crunch. For months, Rubin & Co. had played down the crisis and balked at committing U.S. taxpayer dollars to a bailout that would help South Korea and the big financial institutions around the world that held its debts. But seven days before Christmas, the U.S. changed course, offering immediate aid for the first time, pressing banks to roll over their loans and urging a new Korean leader to seize the moment and change the way his country does business. Finally, on a quiet Christmas Eve, while most Americans were happily distracted, the latest plan was announced. Treasury officials insist the timing was a coincidence.

South Korea's crisis is far from over. And the U.S., as it feels its way as the lone superpower, finds that the tools it needs to lead are not aircraft carriers and armored divisions but emergency stabilization funds and better accounting practices. Inside the Clinton Administration, the man working these delicate new levers is Treasury Secretary Rubin. For the past 50 years, private banks like J.P. Morgan had led the way, picking over the wreckage of a remote foreign collapse. In a newer world, where "remote" economies no longer exist and where many more players make many more investments in many more nations, the game has been reversed. Only one government, whose currency is king, can lead. The House of Morgan has given way to the House of Rubin.

Though the Treasury Secretary is supposed to manage the American economy, Bob Rubin has discovered that a big part of the job comes down to managing the economies of nations overseas. After taking a shellacking from Congress in 1995 for successfully bailing out Mexico with $20 billion in taxpayer-backed loans, Rubin was hardly eager to get out front in the Asian economic crunch. As the liquidity crisis swept across Southeast Asia last summer, Rubin and other U.S. officials urged the International Monetary Fund to take the lead. Washington did not regard the Thai or Malaysian economy as vital to American interests, and in a year that had seen far too many fund-raising stories about Jakarta's Mochtar Riady and the Lippo Group, the Administration could hardly take the lead for anything Indonesian. Despite prosperity at home, the nation--and Congress in particular--was in no mood to be generous. In November, Congress killed $3.5 billion in new borrowing authority for the IMF as part of an unrelated dispute over foreign family-planning funds.