NFSF may be tapped to steady market: finance chief

By John Liu, The China Post

TAIPEI, Taiwan — Addressing investors’ concerns that the U.S. debt standoff may affect Taiwan’s stock market, Finance Minister Chang Sheng-ford (張盛和) said yesterday, adding that in the case of a U.S. debt default and collapse of global stock markets, money from the National Financial Stabilization Fund (NFSF) would be tapped to stabilize the stock market. As the clock ticks down to a possible U.S. default, stock markets in Asia jumped up and down yesterday as investors adopted a more cautious approach. Chang visited the Legislative Yuan yesterday to report on the progress of amendments to the Income Tax Act as well as to answer inquires from legislators. Kuomintang Legislator Lu Shiow-yen (盧秀燕) said in an inquiry session that as the U.S. debt ceiling deadline approaches, central banks around the world have all adopted a “standby mode” to prepare for the worst.

Worrying that the debt problem will not be resolved, three of the U.S.’ largest banks have started stockpiling cash in case a bank run occurs, Lu said. She asked how national banks in Taiwan — banks with shares partially or fully owned by the government – will cope with the potential hazard. Government on Full Alert There is no need to panic, as the government will stay alert and pay close attention as events unfold, Chang assured, adding that Americans are not so silly as to allow their country to go bankrupt, and that they will resolve the problem at the last minute. Should the U.S. default on its debts, the stock market would sustain the largest impact, Chang said, adding that the government will dispatch personnel to closely monitor the situation in the U.S. Vice Premier Mao Chi-kuo (毛治國) may summon an extraordinary legislative session at any time to deliberate on the issue and direct the use of the NFSF to stabilize the stock market. However, a 50- to 100-point drop in the stock market index would still be considered normal, and would not require the injection of emergency funds into the market, Chang added. The US Won’t Default: Chang Despite the fact that the eight national banks of Taiwan hold U.S. debt, Chang said he was not worried that the debt problem would affect the health of Taiwan’s banks. Even if the U.S. government defaults, the worst-case scenario is that payments would be delayed; as such, there is no need for public banks to liquidate U.S. debts, he went on. Although the debt ceiling issue has generated complaints, many nations are still increasing their purchases of U.S. bonds, Chang stated, adding that U.S. Treasury bills are still good investments.