Geithner says lending cuts could hurt U.S. influence

By Glenn Somerville and Lesley Wroughton

WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner urged lawmakers on Wednesday to approve capital increases for global lending institutions and warned that failure to do so could harm U.S. influence abroad.

"We live in a dangerous world, the world isn't standing still," he told a House of Representatives Appropriations subcommittee where he sought backing for a $1.24 billion budget increase to $3.36 billion for international programs that Treasury oversees.

"Other countries like China are ready to fill any vacuum left by a receding America and we have to take a very careful look when we're going to cut back things like this to make sure we're not undermining our core interests," Geithner said.

Geithner cited specific areas in which the United States might lose clout if it failed to be generous.

"At the World Bank, failure to finance the capital increase would lead to the loss of U.S. power to veto changes to the World Bank's government agreement," he said. "At the Asian Development Bank, if the U.S. does not support this capital increase, we will fall behind countries like China and India."

The Obama administration has been at pains to highlight the need to protect the United States' ability to project its influence in a world in which conflicts are springing up nearly overnight, as evidenced by unrest in the Middle East and North Africa.

Amid uncertainty about the attitude that new regimes may adopt toward the West and with competition for key resources fierce in many regions of the world, U.S. officials want to keep as many channels open as possible for exerting global sway.

Secretary of State Hillary Clinton told the Senate Foreign Relations Committee a week ago that it needed to beware the consequences of cutting the U.S. foreign affairs budget.

Geithner said increasing U.S. support for global lenders such as the World Bank could lead to more sales abroad of U.S.-made goods.

"America needs the (Multilateral Development Banks) to nurture the next group of emerging markets for our exports, to foster peace in countries facing conflict or on the brink of collapse, and to advance our shared values in the world," he said.

In response to questions, Geithner said the administration was working closely with strife-torn countries like Egypt and Tunisia to make sure that assets are protected, and seized if necessary for future return to them.

"It is very important as we think about how best to support the political transition underway, (that) we recognize those new governments are going to face enormous economic challenges," he said.

Countries such as Tunisia and Egypt are considered middle-income nations so they would not quality for debt cancellation under existing international debt relief schemes overseen by the World Bank and International Monetary Fund.

(Reporting by Glenn Somerville and Lesley Wroughton; Editing by Kenneth Barry)