[Congressional Record Volume 141, Number 173 (Friday, November 3, 1995)]
[Senate]
[Pages S16648-S16649]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             JAPANESE BANKS

  Mr. FAIRCLOTH. Mr. President, yesterday, it was announced that a 
Japanese bank, Daiwa, will be closed in the United States and charged 
with fraud and conspiracy for hiding over $1 billion in losses.
  The Federal Reserve has done the right thing on this issue--closing 
down a fraudulent bank. But of greater concern, however, is that the 
Federal Reserve has announced it will bail out Japanese banks in the 
United States should they suffer a short-term money crisis. The plan 
was put into place and finalized in September, but only recently was it 
announced to the public.
  Mr. President, I think it is very important that the United States 
not become the lender of last resort for every country in the world, 
and we are rapidly moving ourselves in that direction. First, it was 
Mexico, and now it is Japan. Who is next around the world? Once you 
open this door, it is going to be extremely difficult to close. And we 
are opening it.
  Further, if we cannot get our own budget affairs in order and our 
deficit under control, who will bail us out? Particularly with this 
President, we are getting very little cooperation from the White House 
in our efforts to get the budget in balance in a timely fashion.
  Mr. President, everyone is well aware that Japanese banks are having 
extreme financial problems. News accounts indicate that Japan's 21 
largest banks have $136 billion in nonperforming loans. Some have even 
estimated, and probably more correctly, that this figure could be as 
high as $400 to $600 billion in bad loans.

  This is why I was concerned and dismayed that the Federal Reserve has 
under consideration a plan to meet the short-term credit needs of 
Japanese banks here in this country with the amount of problems they 
have in Japan.
  The Fed has assured us any loans to the Japanese banks will be fully 
securitized with U.S. Treasury securities. But this totally misses the 
point and is beside the point. The principle should never be 
established that the United States is responsible for meeting the 
credit needs of foreign banks. This is a responsibility of the Japanese 
Minister of Finance. I repeat, we should never get in the position and 
start the precedent of bailing out banks around the country.
  I might add that the Japanese Minister of Finance was aware of the 
Daiwa scandal for 6 weeks before it informed our own Federal Reserve 
Board. This is their financial problem, not our financial problem. I do 
not seem to recall any offer from the Japanese to help rescue our 
savings and loans.
  Domestic bailouts are bad enough. It is bad enough that the U.S. 
taxpayers had to put up, pay for $100 billion to correct the savings 
and loan crisis. It was bad enough when our own banks were in trouble 
and the U.S. Treasury had to increase the FDIC's line of credit from $5 
billion to $30 billion to support the banking industry. 

[[Page S 16649]]

  Now, in a new twist, we have embarked on international rescues. What 
would compel anyone in this Government to think it is the role of the 
United States to rescue overseas banks?
  This year we loaned $12.5 billion to Mexico. The money came from the 
Exchange Stabilization Fund, a fund used to help maintain the value of 
U.S. currency. A good part of that fund has been used in Mexico.
  The United States taxpayers may have to and probably will have to 
replenish this fund if Mexico does not pay its loan back. We have had 
the first indication that they will not pay or will be slow paying 
because they have had to roll over one loan four times already.
  The President did all this on his own. The President did all this 
without congressional approval. Now comes this new plan without any 
congressional approval input in any way to rescue Japanese banks.
  Mr. President, this whole policy needs to be examined by the 
Congress. We have to make clear that we are not the world's banker. We 
have to make it clear to the world that we are not the lender of last 
resort. We cannot be the lender of last resort.
  I strongly urge the Federal Reserve to cancel any plan it has to 
engage in this bailout.
  Financial bailouts with tax dollars have to stop, and it is the 
responsibility of the Congress to stop it. Moreover, I cannot think of 
a less worthy use of tax dollars than bailing out foreign banks, 
particularly Japanese banks, when Japan has a positive trade balance of 
over $100 billion.
  Mr. President, since 1980 we have spent $4 trillion we did not have. 
We have borrowed and borrowed. Soon, we will raise the limit to $5 
trillion. We cannot afford to continue spending this way. This is the 
first place I think we should stop it--in bailing out foreign banks.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. KERREY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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