[Congressional Record Volume 141, Number 12 (Friday, January 20, 1995)]
[House]
[Pages H452-H453]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ON MEXICO
The SPEAKER pro tempore. Under a previous order of the House, the
gentleman from California [Mr. Horn] is recognized for 5 minutes.
Mr. HORN. Mr. Speaker, good relations with Mexico are essential for
this Nation. Mexico now faces a crisis, a financial crisis. We are
being asked by the administration to authorize a $40 billion loan
guarantee in order to cover the run which has occurred on the peso.
Mr. Speaker, I would like to include the column by Paul Gigot that
appeared in last Friday's Wall Street Journal: ``On Mexico, U.S.
Firemen Play With Matches.'' I think it outlines what has happened in
the administration's thinking over the last several weeks, and I think
it is essential to the facts of this case.
[From the Wall Street Journal, Jan. 13, 1995]
On Mexico, U.S. Firemen Play With Matches
Maybe President Clinton is lucky that Washington is
transfixed by Newt Gingrich. It means no one's noticed how
his administration has botched the biggest foreign crisis of
his presidency.
That crisis is in Mexico, which only last year he could
tout as a foreign-policy success. Nafta has been his singular
triumph, at home or abroad. Now the collapse of the peso has
tarnished even that good news, with wider fallout than
anything that's happened in Somalia, Bosnia or even Boris
Yeltsin's tumultuous Russia.
This week Mr. Clinton roused himself from his Tony Robbins
tapes to assert that he is ``committed to doing what we can
to help Mexico.'' This, plus a promise of more U.S. cash,
helped to calm financial markets through yesterday, though
only after two more days of market carnage in Latin America.
We can hope the worst is over, but the peso remains some
35% below where it was before its December devaluation. In
human terms, this means that what used to be a dollar of
Mexican purchasing power now buys only 65 cents; expect more
Mexican sons and daughters to arrive in San Diego soon.
In political terms, Mexico's crash has begun an ebb tide in
global confidence, threatening other currencies, raising
doubts about stability in Mexico and inviting Nafta-bashers
to stage a comeback. It has also cost American mutual-fund
holders billions of dollars. All in just three weeks.
[[Page H453]] While Mexico's new Zedillo government made
the awful call, the Clinton team can't escape blame. At its
best the U.S. should be the world's financial fire department
dousing crises before they get out of control. This is
especially true for Mexico, where turmoil ends up on our
front porch. Let's examine Clinton crisis management:
Fire Prevention. It's now clear the peso ran into trouble
after the U.S. Federal Reserve abruptly tightened money last
year. With the peso pegged to the dollar, Mexico's central
bank should have followed suit. But in the middle of an
election campaign, it printed pesos instead of mopping them
up.
U.S. officials never turned on their Mexican smoke
detector. That's the job of Larry Summers, the Treasury
international aide who is to humility what Madonna is to
chastity. He has more to be humble about now.
Firefighting. The U.S. can't seem to find the hydrant, much
less the fire hose. At first, on Dec. 20, Treasury even
blessed devaluation; its press release said a cheaper peso
``will support the healthy development of the Mexican
economy.''
Two days later amid market chaos the Clinton Treasury was
less thrilled, offering a $6 billion credit line to Mexico
while asserting that its ``economic fundamentals remain
sound.'' Thus reassured, markets again whacked the peso. This
earned them a Dec. 27 lecture from Mr. Summers about
``excessive depreciation,'' which didn't work either.
So on Jan. 3 Treasury increased its credit line to $9
billion, only to see markets raise the bar again until Mr.
Clinton promised even more money this week. To be fair,
Treasury was vacant at the top, awaiting new Secretary Robert
Rubin. But that doesn't explain State, where Warren
Christopher is rumored to still be in charge.
The same tail-chasing has taken place at the International
Monetary Fund, which is supposed to be the lead fireman. On
Dec. 22 it too endorsed devaluation--which it called, in IMF-
speak, a mere ``exchange rate action.''
But after markets pummeled the peso, IMF boss Michael
Camdessus took his turn as King Canute lecturing the
financial tides. ``The depreciation of the peso is bigger
than justified by economic conditions,'' he said on Jan. 3,
only to see the peso take another pasting.
Playing With Matches. While incompetence explains a lot,
economic policy may explain more. Clinton firemen didn't
anticipate the financial firestorm because they've got
nothing against devaluation.
Like Mr. Summers, both IMF first deputy managing director
Stanley Fischer and the Fed's Ted Truman favor devaluations
to correct current account deficits. While history shows this
almost never works, these three amigos were undeterred.
Before Mr. Clinton installed Mr. Fischer at the IMF, he was
a professor at MIT calling for a peso devaluation. ``I don't
have second thoughts.'' Mr. Fischer told me this week. So why
the continuing peso rout? ``It's a puzzle,'' he replies,
citing ``the fact that markets did believe there would not be
a devaluation'' before it took place. Thus it may take a
little longer to restore investor confidence in Mexico, he
says.
He's certainly onto something there. As hard-money
economists understand, a currency is a contract between the
government and its people. When government betrays that
contract, trust goes to zero. Especially if a government then
compounds the problem by printing more money or imposing wage
and price controls. Yet this is the Mexican policy the U.S.
Treasury and IMF now endorses as a way out of the mess.
To cover up for these markets, the Clinton team is now
seeking a multi-billion dollar loan guarantee for Mexico from
Congress. This certainly puts Republicans on the spot, since
they won't want to be blamed for further turmoil in Mexico
but can expect attacks from their populist right.
If Republicans cooperate, their price in policy, and maybe
personnel, deserves to be steep. Hearings would be
educational, especially a panel featuring the three amigos of
devaluation. Any taxpayer money that goes to Mexico might be
deducted from the IMF's next replenishment. Helping a
neighbor in need makes sense; subsidizing bad advice is
crazy.
That issue will soon be coming before this House and the other body.
There are two conditions that are absolutely essential on that loan
agreement, if this Representative is to support it.
To the average citizen, $40 billion is a lot of money. And it is also
to the average Member of this and the other body. It is essential that
American interests also be protected while we are trying to help our
friend and neighbor to the south, the Government and people of Mexico.
It is essential that Mexico begin to help us at our border on their
side of the border. Every night in the 20-mile sector of San Diego, CA,
2,000 illegal aliens come over the border. Most of them are from
Mexico. Some are coming over both the Canadian and the Mexican border
and arriving and smuggled in on the east and west coasts, they come
from 49 other source countries, in Asia, in Africa, South America,
Central America, and North America, and Eastern Europe, among others.
{time} 1540
Therefore, the Mexican Government needs to help us at our border, and
they should tighten up their border going north as much as they tighten
up their border with Guatemala for people going north.
Second, Mr. Speaker, the Mexican Government should agree to what I
have described last year, and this year as an agreement on the Criminal
Alien Transfer and Border Management Enforcement Act of 1995, where we
would help train the Customs officers, the Border Patrol officers, the
Border management officers from their country with those in our
country, if they agree that the criminal aliens--illegal criminal
aliens who are convicted in the State and Federal courts of the United
States--would be able to serve out their sentences in the country from
which they illegally came.
Mexico provides about 50 percent of the illegal immigrants to this
country. However, other countries in Latin America are also substantial
in the numbers that are sent to the United States. It is essential that
we have that provision, because right now the incarceration of the
illegals is costing American citizens, taxpaying American citizens,
billions of dollars.
These are underestimates, but the Federal Bureau of Prisons estimates
that $1.2 billion a year is being spent to house illegal aliens. The
State of California estimates that $350 million a year is being spent
to house illegal criminal aliens in our prisons after they have been
sentenced by the courts of California. $350 million for California!
$1.2 billion nationally!
We need to grapple with that, and we need to have this exchange of
prisoners convicted in the United States. I would hope my colleagues
would agree, and as I have said, I cannot support the proposed loan
agreement unless it takes into account the conditions of this country
in this area which have been long overlooked.
Mr. VOLKMER. Mr. Speaker, will the gentleman yield?
Mr. HORN. I am glad to yield to the gentleman from Missouri.
Mr. VOLKMER. Mr. Speaker, I want to commend the gentleman for his
statement. I also would like to inquire of the gentleman, there have
been published reports, and I can't remember whether it was last night
or this morning on one of the television stations, the honorable
gentleman from Iowa who is chairman of the Committee on Banking and
Financial Services used words, and I'm not going to try and quote his
exact words, but words to the effect that if the Democratic Members did
not desist from speaking out on the Speaker's book deal, that he would
be loathe to bring the bill to the floor, the bailout bill for Mexico
to the floor. Is that correct?
Mr. HORN. I have never heard of that until just now.
____________________