Dollars and diplomacy: when U.S. foreign policy bumps up against banking and finance.

• Author: Kleiman, Gary N.

Beginning after the Second World War when the National Security Act was passed and the Bretton Woods institutions were launched, and increasingly in recent years, economic and particularly financial issues have routinely featured in defense and diplomatic planning. The U.S. dollar along with banking and securities industry positions have been key elements of soft helping to drive foreign policy, and also acted as warning signals for potential threats and vulnerabilities at home and abroad to the national interest. Since the 1980s crises in developing countries, later termed "emerging markets," have been a preoccupation, with a shifting regional focus and emphasis on reconstruction and stabilization. Over the past decade frontline anti-terror states have drawn attention, and since September 11, 2001, the mission has been further adapted to concentrate on such areas as banking sanctions, cross-border payment tracking, infrastructure protection, and heightened screening of inward direct and portfolio investment.

Numerous agencies and departments are directly and indirectly involved in these questions in a supporting capacity for policy coordination and formulation. The list includes the U.S. Commerce, Defense and State Departments, and the Central Intelligence Agency, Federal Reserve, Office of the U.S. Trade Representative, Council of Economic Advisers, Agency for International Development, and Securities and Exchange Commission. However, the Treasury Department, through its international affairs function, and the White House's National Security and Economic Councils, with dedicated personnel working jointly and separately, are the primary responsible centers for articulation and debate.

The Treasury Secretary has long taken the lead in meshing and overseeing national and international economic policies. From the Nixon administration to that of George Bush senior, this dominance was formalized through Economic Policy Boards with the incumbent at the helm. In the early 1990s the model was superseded by President Clinton's creation of a stand-alone National Economic Council, with designated international deputies in charge, although resources from the outset have been devoted mainly to domestic fiscal and tax matters. Under this construct the Treasury Secretary remained top spokesperson, but the National Economic Council under Robert Rubin, its first director, conducted the daily outreach to multiple Council members in an effort to forge...