You never want a serious crisis to go to waste. Former White House Chief of Staff and now Chicago Mayor Rahm Emanuel's brazen credo comes to mind as the Obama administration tries to link emergency financial aid for Ukraine with changes to the International Monetary Funds governance and financing.
The proposed reforms would double the size of the IMFs main source of funding, which are country contributions known as IMF quotas, to about $733 billion. They would also increase the voting power of emerging-market countries such as China, India, Brazil and Russia in directing IMF resources. Congressional approval is the final hurdle before the changes, introduced in 2010, are enacted.
In January the administration tried to slip the IMF reform package into its draft federal spending bill, only to withdraw it amid Republican resistance. Now with Vladimir Putins invasion of the Crimea and the new Ukrainian Prime Minister Arseniy Yatsenyuk in Washington this week seeking U.S. support, the administration claims the IMF reforms are crucial to rescuing Ukraine. On Wednesday, the Senate Foreign Relations Committee passed legislation that would aid Ukraine and approve the IMF changes. That will go to the full Senate, where it is likely to pass.
The Republican-led House is a different story. When representatives overwhelmingly approved $1 billion in loan guarantees for Ukraine on March 6, they specifically rejected language on IMF funding. Still, Treasury Secretary Jacob Lew pressed to link the two, telling the House Ways and Means Committee: At a time when the U.S. is at the forefront of international calls in urging the Fund to play a central and active first responder role in Ukraine, it is imperative that we secure passage of IMF legislation now.
Except that its not. The IMF has been playing an active role in Ukraine since shortly after the 1991 collapse of the Soviet Union and Ukraine's independence. IMF loans to Ukraine have amounted to some $19 billion since 1994, $14.3 billion since 2008.
Proponents argue that the governance changes are needed to bolster the IMFs central role in maintaining international macroeconomic stability and reinforcing its ability to respond to financial crises. Opponents say the $570 billion in supplementary funds committed to the IMF in the wake of the 2008 financial crisisthe U.S. portion was $108 billionprovides enough resources to deal with emergencies. Former IMF Managing Director Dominique Strauss-Kahn boasted at the time that the IMFs emergency lending procedures enabled it to act quickly: We are ready to answer any demand by a country facing problems.
Whether these changes serve the interests of U.S. taxpayers should be openly debated before Congress votes. They would require transferring $63 billion in U.S. funds from the IMFs crisis fund to its general lending account, where the U.S. would have less control over how it was used.
For those already skeptical about the IMF's effectiveness, its not a decision to be rushed. As House Financial Services Committee Chairman Jeb Hensarling (R., Texas) said in December: Many Americans question the wisdom of supporting the IMF and other multilateral financial institutions that take their hard-earned dollars and use them to bail out other countries.
That doesnt mean Americans are not broadly supportive of helping Ukraine in its hour of need. Last week the House voted 385-23 under an expedited process to let the government guarantee private loans to Ukraine. House Foreign Affairs Committee Chairman Ed Royce (R., Calif.) is also pursuing sanctions on Russian high-ranking officials, state-owned banks, commercial enterprises and key individuals behind the Russian intervention. The time to act is now, he said in a statement released March 4.
The Obama administration risks undermining U.S. help for Ukraines brave new leadership if it insists on inserting IMF funding into the final legislation. What message would it send the worldand the Kremlinif Congress failed to pass an emergency measure to help Ukraine because of a peripheral issue? This is no time for President Obama to exploit a crisis by adding an unpopular measure to a matter of genuine world importance.