[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.
  

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