[Congressional Record Volume 141, Number 19 (Tuesday, January 31, 1995)]
[House]
[Page H893]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                      AGAINST THE MEXICAN BAILOUT

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 4, 1995, the gentleman from Kentucky [Mr. Bunning] is 
recognized during morning business for 5 minutes.
  Mr. BUNNING of Kentucky. Mr. Speaker, the President has proposed that 
the United States cosign a loan for Mexico to the tune of $40 billion. 
But is the Government of Mexico a good risk?
  The Wall Street Journal pointed out in its editorial on January 23, 
the problem in Mexico is bad economic policy. The Mexican Government 
borrowed too much and now it is suffering because it cannot meet its 
payments.
  That inability to pay has caused a crisis of confidence in the 
Mexican peso which plunged in value. This, of course, had led to a wave 
of handwringing by the usual handwringers here in Washington, most of 
whom were pushing us to support NAFTA just a short time ago.
  Apparently, the Mexican Government has not yet learned that free 
financial markets do not reward over-consumption in the form of 
borrowing in excess of the country's ability to pay.
  Unfortunately, Mr. Clinton and his economic advisers have not learned 
that lesson either.
  We went down this sorry road in the early 1980's when we bailed out 
the big banks that were too big to fail but which had greedily 
overextended credit to Mexico and other developing countries.
  The Clinton administration would have us believe that if we simply 
pony up the loan guarantee, the Mexican Government will reform its 
policy of borrowing short term to pay for current consumption.
  It is quite a leap of faith that Mr. Clinton is asking us to make. 
And, the leap looks even longer when you know that the Mexican 
Government does not even acknowledge that it has made a mistake.
  The Wall Street Journal, again in its January 23 3ditorial, quoted 
the Mexican Foreign Minister as saying that the markets should not be 
taken too seriously because they are nothing more than ``15 guys in 
tennis shoes in their 20's.''
  That is hardly the type of attitude that inspires my confidence to 
guarantee an American bailout for Mexico.
  It does not seem to this Kentuckian that the working people of the 
United States should be cosigning a note to save those who made bad 
investment decisions. The big banks that made those bad decisions and 
those pension funds that made those bad decisions should bear the 
losses for their poor judgement, not the taxpayers.
  A loan from the Federal Government is great--if you can get it. I am 
certain that Orange County, CA, could use our help. I am sure that the 
local governments in eastern Kentucky could do with a little help too.
  We need to concentrate on helping our fellow Americans first. If we 
want to guarantee loans, we do not need to look beyond the city limits 
of Washington because our National Capital is in financial trouble.
  Before we obligate ourselves to a potential $40 billion bailout of 
Mexico, we must have collateral from them to secure the loan. If the 
collateral does not cover the full cost of the loan, we should not 
cosign.
  My guess is that short of military intervention Mexico will be no 
more willing to surrender the collateral today than when they would not 
pay American investors after nationalizing the oil industry.
  As William Seidman pointed out in his companion article to the Wall 
Street Journal editorial, ``Insuring a debtor who has a real problem is 
not likely to be cost free.''
  We cannot control the policies of the Mexican Government now anymore 
than we could in the 1980's; and, those are the policies which must 
change to restore confidence in the peso.
  The potential cost of the guarantee is $40 billion regardless of who 
is ultimately in charge of Mexico's Government. And, I, for one, do not 
think that it is wise for the United States to underwrite bad decisions 
by Mexico and big international banks.
  We should step back and let Mexico settle its problems the old-
fashioned, American way: Let the debtor and creditors settle the 
problem between themselves, without the United States taxpayers taking 
a $40 billion hit.


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