New York Times examines Barrick''s hedging and Blanchard''s lawsuit

Section:

Bush may tap Depression-era fund to aid Turkey

http://reuters.com/financeNewsArticle.jhtml?
type=bondsNews&storyID=2308692

By Adam Entous

WASHINGTON, Feb. 27 (Reuters) -- U.S. President George
W. Bush may dip into a Depression-era emergency fund for
a short-term loan to Turkey as he presses for access to
Turkish bases for a possible attack on Iraq, administration
and congressional sources say.

The $38 billion Exchange Stabilization Fund was used in
1995 by former President Bill Clinton to bail out Mexico
over objections from many Republicans.

Bush used the fund to help Uruguay last year and, with
an Iraq war potentially just weeks away, is considering
tapping into it again -- to provide what sources say
would be about an $8.5 billion bridge loan to NATO ally
Turkey.

The administration wants Turkey's permission to use
its bases to attack Iraq from the north. In return, Turkey
is demanding an aid package worth up to $30 billion in
U.S. grants and loan guarantees to help cushion its frail
economy from the impact of a war.

As a down payment on the aid package, which is subject
to congressional approval, Turkey wants a bridge loan,
which would be repaid once Congress acts.

"They want it right away," a U.S. official said of Turkey's
request for a bridge loan.

If Washington is to meet Turkey's demand, administration
and congressional sources say the White House has little
choice but to tap into the fund. Unlike other forms of
bilateral aid, which must be approved by Congress, the
multibillion-dollar fund falls wholly within the jurisdiction
of the Treasury secretary, subject only to presidential
approval.

"It would be inappropriate to discuss details of a package
while we are in negotiations," said Treasury spokesman
Tony Fratto, who added, "We have been in the process
of consulting with Congress regarding all aspects of a
possible assistance package for Turkey."

Several senior congressional aides said they had
received little information from the administration, and
warned a bridge loan could force Congress into a
corner, giving lawmakers little choice but to quickly
approve Turkey's aid package to repay the U.S.
Treasury.

Controversial history

Sources say the administration initially balked at
Turkey's request for a bridge loan drawing from the
Exchange Stabilization Fund. They argued the country
was not currently facing a major currency crisis.

But with U.S. naval ships waiting off Turkish shores
and Pentagon war planners anxious for a decision,
sources say the administration was reconsidering.

Turkish Economy Minister Ali Babacan told reporters
on Wednesday that Washington was offering an $8.5
billion bridge loan "as an advance against the credits
to be awarded at a later stage and will be used until
U.S. congressional approval (of the total package) is
secured."

Set up in 1934, the fund was intended primarily for
emergency use to defend the dollar.

The fund returned to the public eye in 1995 when the
Clinton administration, faced with congressional
opposition to a taxpayer-financed bailout for Mexico,
said it would use the fund's resources. That fueled
criticism from Republicans about whether that was
an appropriate use for the money.

The United States made up to $20 billion available
to Mexico, most of it from the fund, although not all
the cash was used. The money was paid back with
interest and the United States even made a profit
on the deal.

Clinton tapped the fund again in the financial crisis
that hit Asia in the late 1990s, again drawing
Republican fire.

Despite a pledge not to follow the Clinton
administration's lead, Bush in August 2002 provided
a $1.5 billion bridge loan to struggling Uruguay.

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