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A politically volatile mix
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November 24, 1997: 11:08 a.m. ET
Schwab director says Treasury is angry over Japan's financial policies
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NEW YORK (CNNfn) - With fears that Japan's deepening economic malaise will flood the U.S. market with cheap products to ease the country's currency crunch, some analysts say the Clinton administration is very upset with Japan over its handling of the financial crisis.
Greg Valliere, managing director for Charles Schwab Washington Research Group, spoke with CNNfn anchors Beverly Schuch and Stuart Varney about the possible response from Washington. A transcript of his comments follows.
BEVERLY SCHUCH: As we speak now, President Clinton is probably meeting with Japan's prime minister. What do you expect they are saying right now?
GREG VALLIERE: I think the president has to be pretty blunt with the Japanese. Privately at the Treasury Department there's a great deal of anger that the Japanese are still in denial, that they don't get it, that they don't understand they have make structural reforms and stimulate their economy.
STUART VARNEY: How is America going to deal with the coming political problem of a flood of cheap imports from Asia taking market share from American companies, coupled with [the expenditure of] a lot of American taxpayer money for bailing out the Asian economies?
VALLIERE: It's a great question, Stuart, and I worry that the protectionism that we began to see a month ago when Dick Gephardt won on fast track could get a head of steam now.
If you're the representative of a district that makes textiles and you've already been hurt by cheap imports, then you're supposed to vote for tax money to bail out South Korea or other Asian countries. It's something that I think will lend itself to demagoguery.
SCHUCH: And Yamaichi was a key underwriter for several of Japan's corporations. Does the United States expect that this will be the last brokerage to fall and what would be the effect of a domino effect?
VALLIERE: They were the weakest and I think that this is not a huge shock to see them go under. Perhaps after a rocky hour or two this morning on Wall Street, the markets will realize that we've only seen the weakest [of the Big Four] go.
However, the idea the Japanese have to come up with bailout money for Korea is another factor. I think you could see other Japanese institutions teetering in the next couple of weeks.
VARNEY: [Do you see] the U.S. economy remaining firm, still expanding, low inflation, low interest rates, situation under control, everything looking good?
VALLIERE: Even though I don't like the politics of this right now, it's a very volatile, combustible mix. Ironically, I think this is just what we need to take the froth off of our economy. With this, we can continue to grow at a moderate rate without having the Fed tighten [interest rates]. 
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