Lowey Statement on U.S. International Programs

Statement

Lowey Statement on U.S. International Programs

Congresswoman Nita Lowey (D-NY), Chairwoman of the State and Foreign Operations Appropriations Subcommittee, today delivered the following opening statement at the subcommittee's hearing on U.S. Treasury International Assistance Programs and U.S. Contributions to International Financial Institutions with Treasury Secretary Henry Paulson:

Today we welcome Secretary Henry Paulson to discuss the Department of the Treasury's $2.241 billion fiscal year 2009 budget request for contributions to international programs, an increase of $941 million above the fiscal year 2008 appropriation.

Mr. Secretary, you have come to our Subcommittee at a time when many Members have serious concerns about the state of our domestic economy. Each of us has constituents who are reeling from record gas prices, falling home values, and shrinking job opportunities. Many of us also question aspects of the regulatory plan unveiled last week. While this hearing is about Treasury's role on the international stage, these domestic issues have a significant impact globally.

I am interested to hear your views on the effect of the current financial crisis on the global economy and the multilateral development banks, their risk exposure, and the potential liability for U.S. taxpayers. I hope your opening statement will shed some light on how the liquidity crisis is affecting developing nations' already limited access to credit, and the role of international institutions in mitigating this risk.

Over the past several months, this Subcommittee has examined the effectiveness and coordination of U.S. bilateral foreign assistance. With that in mind, Mr. Secretary, I am interested in hearing why Treasury should have its own capacity to provide international technical assistance and why these programs should remain outside of the existing foreign aid infrastructure.

Indeed, experience has shown that our assistance is most effective when it is well-coordinated both within the U.S. government and with other donors. As one of the lead negotiators with the G-8 and as the U.S. representative to the multilateral banks, I am interested in hearing the steps you are taking to represent U.S. development priorities during discussions with other world leaders.

The United States has been supporting a reform agenda and I believe that the World Bank is making progress in this area under its new leadership.

I was pleased that the World Bank leadership endorsed the Volcker Panel Report, which laid out concrete steps to address whistleblower protection, corruption investigation allegations and the role of the internal investigations unit at the Bank. However, I remain concerned about continuing corruption allegations, including recent evidence of collusion in the India health sector programs. Although both the World Bank and India are taking action on this issue now, it took three years for the Bank to admit these charges. I would like to hear what Treasury is doing to encourage immediate implementation of the Volcker recommendations, including the establishment of a strong whistleblower protection policy. The fiscal year 2009 budget request includes a 15 percent increase in our contribution to the World Bank, and therefore Treasury oversight will be more important than ever.

Additionally, I am deeply bothered that the World Bank group continues to disburse funding to Iran. In fact, while no new loans have been provided since 2005, disbursement of existing loans to Iran has increased in each of the last four years. It is perplexing that despite UN sanctions against Iran, the World Bank has approved over $1.3 billion in loans for Iran. While some of these loans are humanitarian in nature, many are for broad infrastructure projects. In addition, the Bank also provided loan guarantees to companies doing work in Iran in 2005. I would like your thoughts on these policies and whether there are additional steps the U.S. should be taking to stop the flow of these disbursements, halt future investment guarantees, and dissuade European and Asian banks from investing in Iran.

The Treasury Department plays a critical role in stemming terrorist financing, but cannot be successful when our allies leave commitments unfulfilled. What is the Treasury Department doing to catalyze action in other countries, particularly Saudi Arabia, to prevent funds from reaching the hands of terrorists?

With respect to debt relief, I commend the Administration for its commitment. However, I am concerned that we are not doing enough to ensure that these funds are reaching their intended recipients or being spent as envisioned. Many of us were outraged when we first learned of so-called "vulture funds" which prey upon poor countries, swooping in and buying their debt when it is about to be written off, only to sue for the original value of the debt plus interest once it has been forgiven. These unforgivable actions have defrauded needy countries while lining the pockets of wealthy businessmen. Mr. Secretary, what steps will Treasury take in the coming year to address vulture funds and to ensure that debt relief for heavily-indebted poor countries (HIPC) is sustainable?

The fiscal year 2009 budget requests significant funds for global climate change - an issue that we all know this Administration has had difficulty embracing. I commend you for your personal leadership and commitment to corporate environmental responsibility—going back to your time at Goldman-Sachs. I imagine that your commitment played a role in the funding requested for the Clean Technology Fund and I hope you will share more details on this initiative.

However, I must note that I do not believe that eight years of back-sliding on international climate change commitments can be rectified simply by throwing money at the problem. The U.S. must exercise leadership on curbing greenhouse gases and investing in alternative energy and clean technology at home.

Secretary Paulson, I close by noting that you have just returned from China, where you were the most senior U.S. government official to visit since the Chinese government's violent crackdown in Tibet. Many of us have spoken out forcefully against China's oppression of peaceful democratic activists in Tibet and elsewhere, their at best inaction and at worst, complicity in the genocide in Darfur, and their continued intransigence on United Nations resolutions that impose sanctions on Iran. In the past, you have not raised concerns about these issues in your conversations with the Chinese, illustrating what appeared to be a bifurcated policy within the Administration towards China: the State Department presses China on human rights concerns while Treasury, which wields far greater leverage, would not engage on these issues. While I appreciate the distinct roles played by each agency, I fear that Treasury's past silence has sent a message of inconsistency or worse - indifference - on critical concerns. I was therefore pleased to hear that on your recent trip, you engaged the Chinese government on the issue of Tibet. I hope this will not be an isolated incident and that you will continue to press on issues of concern.

Secretary Paulson, I appreciate your testimony and look forward to working with you to ensure that our investments in the multilateral development banks address the development priorities of the 21st century.

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