[House Report 104-53]
[From the U.S. Government Publishing Office]
104th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 104-53
_______________________________________________________________________
REQUESTING THE PRESIDENT TO SUBMIT INFORMATION TO THE HOUSE OF
REPRESENTATIVES CONCERNING ACTIONS TAKEN THROUGH THE
EXCHANGE STABILIZATION FUND TO STRENGTHEN THE MEXICAN PESO AND
STABILIZE THE ECONOMY OF MEXICO
_______________________________________________________________________
February 27, 1995.--Referred to the House Calendar and ordered to be
printed
_______
Mr. Leach, from the Committee on Banking and Financial Services,
submitted the following
R E P O R T
[To accompany H. Res. 80]
The Committee on Banking and Financial Services, to whom
was referred the resolution (H. Res. 80) requesting the
President to submit information to the House of Representatives
concerning actions taken through the exchange stabilization
fund to strengthen the Mexican peso and stabilize the economy
of Mexico, having considered the same, report favorably thereon
with an amendment and recommend that the resolution be agreed
to.
The amendment is as follows:
Strike out all after the resolving clause and insert in
lieu thereof the following:
That the President is hereby requested to provide to the House of
Representatives (consistent with the rules of such House), not later
than 14 days after the adoption of this resolution, the following
documents in the possession of the executive branch, if not
inconsistent with the public interest:
(1) Any document concerning--
(A) the condition of the Mexican economy; and
(B) any consultations between the Government of
Mexico and the Secretary of the Treasury (or any
designee of the Secretary), the International Monetary
Fund, or the Bank for International Settlements.
(2) Any document containing--
(A) a description of the activities of the central
bank of Mexico, including the reserve positions of such
central bank and data relating to the functioning of
Mexican monetary policy;
(B) information regarding the implementation and the
extent of wage, price, and credit controls in the
Mexican economy;
(C) a complete documentation of Mexican tax policy
and any proposed changes to such policy;
(D) a description of all financial transactions, both
inside and outside of Mexico, directly involving funds
disbursed from the exchange stabilization fund and the
International Monetary Fund, including transactions
with--
(i) individuals;
(ii) partnerships;
(iii) joint ventures; and
(iv) corporations;
(E) a list of planned or pending regulations of the
Government of Mexico affecting the private sector of
the Mexican economy; and
(F) any efforts to privatize public sector entities
in Mexico.
(3) Any document concerning any legal analysis with regard to
the authority of the President or the Secretary of the Treasury
under section 5302 of title 31, United States Code, the Bretton
Woods Agreements Act, the Special Drawing Rights Act, the Gold
Reserve Act of 1934, or any other law or legal authority to use
the stabilization fund to implement the President's proposed
Mexican support package.
(4) Any document concerning any legal opinion regarding the
applicability or nonapplicability of the provisions of the
Federal Credit Reform Act of 1990 to the exchange stabilization
fund.
(5) Any document concerning any agreement between the United
States and the Government of Mexico (or any other appropriate
Mexican entity) to provide assured sources of repayment for all
payments by the United States in connection with any short-,
intermediate-, or long-term credit facility made available to
Mexico after December 31, 1994.
(6) Any document concerning the implementation by the
President and the Secretary of the Treasury (or any designee of
the Secretary) of the authority under section 5302 of title 31,
United States Code, with respect to any credit facility
described in paragraph (5).
(7) Any document concerning efforts by the international
community to stabilize the economy of Mexico and the current
status of negotiations with other countries to improve the
capacity of international institutions to handle similar
crises.
(8) Any document concerning the extent to which Mexico is
complying with the terms and conditions agreed to in connection
with the exercise of the authority under section 5302 of title
31, United States Code, with respect to any credit facility
described in paragraph (5), including any document concerning
the extent to which--
(A) the Government of Mexico has agreed to use the
proceeds of any loan which has been made, or any
security for which any guarantee has been issued,
through any such facility to help strengthen the
Mexican peso and help stabilize financial and exchange
markets by facilitating the refinancing or redemption
of short-term debt instruments issued by the Government
of Mexico;
(B) the Government of Mexico has agreed to provide--
(i) a comprehensive financial plan which
includes a description of the intended use of
any such loan or security; and
(ii) ongoing reports on the implementation of
the financial plan while any such loan or
security is outstanding;
(C) the Government of Mexico is respecting the
autonomy of the central bank of Mexico and the mandate
of such bank to seek stability with respect to the
purchasing power of the Mexican peso;
(D) the central bank of Mexico is pursuing a
noninflationary monetary and credit policy that
controls credit expansion and the growth of the Mexican
money supply in order to maintain the Mexican peso as a
strong currency;
(E) the central bank of Mexico is providing on a
periodic basis to the Board of Governors of the Federal
Reserve System and other appropriate governmental
entities information necessary to make an assessment
with respect to the policy described in subparagraph
(D), including central bank money supply and monetary
policy data;
(F) the Government of Mexico is implementing the
privatization policy established by such Government to
transfer enterprises currently owned or controlled by
the Government to private ownership;
(G) the Government of Mexico continues to permit
entry of foreign direct investment into Mexico and the
repatriation of investments from Mexico by United
States nationals; and
(H) the Government of Mexico is pursuing market-
oriented measures to stem the flow of domestically
owned capital from Mexico.
(9) Any document concerning any analysis of the resources
which the International Monetary Fund has agreed to make
available in response to the Mexican financial crisis.
(10) Any document concerning--
(A) the percentage of the resources which the
International Monetary Fund has agreed to make
available in response to the Mexican financial crisis
which are attributable to capital contributions to such
Fund by the United States; and
(B) the extent to which the participation of the
International Monetary Fund in international efforts to
strengthen the Mexican peso and stabilize the economy
of Mexico is likely to require additional contributions
to such Fund by the member states of the Fund,
including the United States.
(11) Any document concerning any agreement between the United
States and the Government of Mexico detailing the fee structure
and the terms and conditions under which loans, loan
guarantees, and other financial support may be made available
to Mexico through the stabilization fund established under
section 5302 of title 31, United States Code, including--
(A) any document concerning background materials on
the assessment of the Mexican economy and any United
States Government rationalization for pressing the
central bank of Mexico to increase interest rates from
40 percent to 50 percent;
(B) any document concerning the framework agreement
entered into on or about February 21, 1995, which
serves as the umbrella accord for the provision of any
such loan, loan guarantee, or other financial support;
(C) any document concerning the medium-term exchange
stabilization agreement entered into on or about
February 21, 1995, which specifies the terms and
conditions for medium-term swap transactions between
the United States and Mexico;
(D) any document concerning the guarantee agreement
entered into on or about February 21, 1995, which
specifies the terms and conditions for the issuance of
guarantees by the United States of debt securities
issued by Mexico; and
(E) any document concerning the oil proceeds facility
agreement entered into on or about February 21, 1995,
which establishes a mechanism to provide an assured
source of repayment of United States resources.
(12) Any document concerning the assured source of repayment
to the United States for any short-, intermediate-, or long-
term credit facility made available to Mexico after December
31, 1994.
(13) Any document concerning the net worth of Pemex, the
historical annual revenues of Pemex, the projected annual
revenues during the 5-year period beginning on the date of the
adoption of this resolution, and the extent to which the
proceeds from the sale of Mexican oil to customers within
Mexico or outside of Mexico--
(A) are required to be paid to the Government of
Mexico as taxes or as payments in lieu of taxes; or
(B) have been pledged as collateral for the repayment
of any loans or other extensions of credit to the
Government of Mexico or to Pemex other than any credit
facility described in paragraph (12).
(14) Any document concerning the value of any oil the
proceeds from the sale of which are pledged to assure the
repayment of any financial assistance provided by the United
States to Mexico, the documentation received by the United
States in connection with such pledge, and the manner in which
the United States may exercise any rights under such pledge to
obtain the proceeds as repayment for losses incurred.
(15) Any document concerning any assurances given by the
Government of Mexico to the United States Government with
respect to changes in past economic policies or the adoption of
a new economic plan.
(16) Any document concerning the decision by the President to
use the assets of the exchange stabilization fund established
under section 5302 of title 31, United States Code, in
connection with any short-, intermediate-, or long-term credit
facility made available to Mexico after December 31, 1994.
(17) Any document concerning the criteria used by the
President or the Secretary of the Treasury (or any designee of
the Secretary) in making any decision to use the assets of the
exchange stabilization fund to respond to any economic, balance
of payments, or exchange crisis in any country and the facts on
which such determinations were made with respect to Poland, in
1989, and to Mexico in December of 1994 and early 1995.
(18) Any document concerning how the use of the assets of the
exchange stabilization fund as a source of credit to Mexico
compares with all prior uses of the assets of the fund since
1945 for all other countries under section 5302 of title 31,
United States Code, with regard to--
(A) the dollar amount of each transaction;
(B) the type of the transaction, such as loan, loan
guarantee, or swap agreement (as defined in section
11(e)(8)(D)(vi) of the Federal Deposit Insurance Act);
(C) the purpose of the transaction, such as whether
it was to support the United States dollar, to support
a foreign currency, or any other purpose;
(D) the duration, in years, of the transaction during
which any credit was or is permitted to remain
outstanding;
(E) any security or collateral pledged to assure
repayment with respect to each such transaction; and
(F) the existence of any agreement involving the
International Monetary Fund or the Board of Governors
of the Federal Reserve System in connection with each
such transaction and the terms of each agreement by
such Fund or Board.
(19) Any document concerning debts owed by the Government of
Mexico and any entity owned or controlled by the Government of
Mexico to United States public or private creditors which are
outstanding as of the date of the adoption of this resolution,
the status of each such debt (including whether such debt has
been refinanced), and the collateral or security pledged to
assure repayment of such debt.
(20) Any document concerning an accounting of all the fund
flows through the exchange stabilization fund established under
section 5302 of title 31, United States Code, during the 24-
month period ending on the date of the adoption of this
resolution, including the identification of the amount of and
purpose for each transaction involving such fund during such
period.
(21) Any document concerning the balance of available assets
in the exchange stabilization fund as of the date of the
adoption of this resolution.
(22) Any document concerning the amount by which the total
principal amount of loans, loan guarantees, and other
extensions of credit which the President has announced will be
made available to Mexico exceeds the total amount of available
assets in the exchange stabilization fund established under
section 5302 of title 31, United States Code, and the means for
covering the shortfall, if any.
(23) Any document concerning the departure of the
International Monetary Fund from the Fund's customary
guidelines for country assistance, including any recommendation
made by the President or any other officer or employee in the
executive branch to the Fund regarding the amount of financial
assistance the Fund was preparing to make available to Mexico,
and any reciprocal agreement made by the executive branch to
the Fund for making such assistance available in an amount
greatly in excess of the customary guidelines.
(24) Any document concerning the factual circumstances
pursuant to which the Bank for International Settlements has
become a lender to individual countries beyond the Bank's
customary role as a clearinghouse for central banks.
(25) Any document concerning the financial obligations of the
Board of Governors of the Federal Reserve System to the Bank
for International Settlements.
(26) Any document concerning the relationship among the Board
of Governors of the Federal Reserve System, the Bank for
International Settlements, and the central banks of other
countries which are affiliated with such Bank in any manner
with regard to assigning or apportioning the ultimate liability
for any loss incurred in connection with the extension of
credit by such Bank to the Government of Mexico.
(27) Any document concerning any discrepancy between the
amount the President announced is available in the exchange
stabilization fund established under section 5302 of title 31,
United States Code, and the amount shown as being available in
such Fund in the monthly statement of the public debt of the
United States on December 31, 1994.
(28) Any document concerning conditions which were put on the
credit facilities made available to Mexico through the exchange
stabilization fund or the Board of Governors of the Federal
Reserve System that were requested by members of the investment
community.
background and purpose
House Resolution 80 requests the President to provide the
House of Representatives with documents relating to the
Administration's use of the Exchange Stabilization Fund (ESF)
and the Administration's proposal to stabilize the Mexican
peso. The documents are to be provided no later than 14 days
after the adoption of the resolution by the House.
According to Rule 22, clause 5, of the Rules of the House
of Representatives, H. Res. 80 is considered to be a resolution
of inquiry, which requires the Committee to act on the
resolution within 14 legislative days after it is introduced.
If the Committee does not act on the measure, a Member of the
House may move to discharge the Committee from further
consideration of the resolution, with such motion to discharge
being considered a privileged one under the precedents and
practices of the House. H. Res. 80 was introduced and referred
to the Committee on Banking and Financial Services on February
10, 1995, with action taken on February 23, 1995.
Under the rules and precedents of the House, a resolution
of inquiry is the means by which the House requests information
from the President of the United States or the head of one of
the executive departments. According to Deschler's Procedure it
is a ``simple resolution making a direct request or demand of
the President or the head of an executive department to furnish
the House of Representatives with special factual information
in the possession of the executive branch.'' The effectiveness
of a resolution of inquiry derives from the comity extended by
one branch of government to another, and not from any legal
obligation. The resolution is a request for documents and its
passage does not override any legal or constitutional privilege
which may be afforded these documents.
Under Rule 22, the practice of the House gives a resolution
of inquiry a privileged status. To enjoy the privilege a
resolution should call for facts rather than opinions, should
not require investigations, and should not present a preamble.
Turning from procedure to substance and to the implicit
policy question at issue in the resolution--the President's
decision to utilize up to $20 billion in resources from the ESF
to help stabilize the Mexican currency and financial system--
Members on both sides of the aisle have differing judgments and
perspectives.
However, the scale of the proposed ESF swap and guarantee
arrangements with Mexico are of such an unprecedented magnitude
that unprecedented accountability is appropriate. The House of
Representatives is therefore obligated to review how Mexico got
into its present dilemma and what obligations the U.S.
government has undertaken to resolve this crisis. It is also
the obligation of the House to assess why and how Mexico made
the major economic mistakes it has and whether the U.S.
government failed to recommend or insist that Mexico follow a
more prudential course.
It is in the context of the paragraph above that the
request for documents contained in this resolution should be
interpreted. But the scope of this request for documents should
not be construed to include drafts of documents provided in
final form, nor any notes of any individual.
The Committee further notes that under the rules and
precedents of the House, requests for ongoing reports
concerning actions taken through the ESF and international
financial institutions are outside the scope of this resolution
of inquiry.
Nevertheless, many Members have expressed a strong desire
that there be ongoing reporting on the U.S. and international
financing package for Mexico. In this context, it is the strong
expectation of the Committee that it should receive not later
than March 31, 1995, and on the last day of each calendar
quarter thereafter during which any loan or guarantee is made
pursuant to the approval of the President issued on January 31,
1995, a report describing:
(A) The condition of the Mexican economy and
important financial and economic issues in Mexican-U.S.
relations;
(B) Significant consultations between the Government
of Mexico and the Department of the Treasury, the
International Monetary Fund, or the Bank for
International Settlements;
(C) Any funds disbursed to Mexico or any guarantees
issued with respect to securities issued by Mexico from
the Exchange Stabilization Fund;
(D) Quarterly financial statements of the Exchange
Stabilization Fund including a balance sheet, income
statement, and notes;
(E) Information concerning respect of the Government
of Mexico for the Mexican central bank (Banco de
Mexico) and the mandate of such bank to seek stability
of the purchasing power of the Mexican peso;
(F) Pursuit by Banco de Mexico of a non-inflationary
monetary and credit policy that controls credit
expansion and the growth of the Mexican money supply in
order to maintain the Mexican peso as a strong
currency, and the provisions by such bank to the Board
of Governors of the Federal Reserve System and other
appropriate governmental entities on a regular basis of
information necessary to make this assessment,
including central bank money supply and monetary policy
data;
(G) The resources which the International Monetary
Fund (IMF) has agreed to make available in response to
the Mexican financial crisis. The initial report should
include an identification of the percentage of IMF
resources available to Mexico which are attributable to
capital contributions by the United States to the IMF,
and an analysis of the extent to which the IMF's
participation in such efforts will likely require
additional contributions by member states, including
the United States, in the future.
In the same vein, reflecting a desire on the part of many
Committee Members to receive ongoing reports, after the
expiration of the period during which any loan or guarantee is
made available or may be made available to Mexico pursuant to
the approval of the President issued on January 31, 1995, and
until no loan or guarantee made available to Mexico pursuant to
such presidential approval remains outstanding, it is the
strong expectation of the Committee that it should also receive
a semi-annual report concerning the same matters as are to be
the subjects of the quarterly reports provided for in the
paragraphs above.
Likewise, it would also be the strong expectation of the
Committee that not later than 90 calendar days after the
adoption of this resolution, it will be provided with a
description of the status of negotiations with other countries
to improve the capacity of international institutions to handle
similar crises in the future.
rollcall votes on amendments; final committee action
In compliance with clause (2)(l)(2)(B) of rule XI of the
Rules of the House of Representatives, the record of Committee
rollcall votes taken on final passage or amendments during the
Committee's consideration of H. Res. 80 is set out below, as is
a report on the Committee's final action on the bill.
On February 23, the Committee met to consider H. Res. 80,
the required quorum being present at all times when the
Committee conducted legislative business.
An amendment in the nature of a substitute was offered by
Mr. King. The Committee approved by voice vote two second
degree amendments to the King substitute, one offered by Mr.
Roth and one by Mr. Sanders. The King substitute was then
adopted by voice vote.
The Committee, with a quorum present, ordered H. Res. 80,
as amended, favorably reported by a record vote of 37 ayes and
5 nays:
Voting aye: Leach, McCollum, Bereuter, Roth, Lazio, Bachus,
Castle, King, Royce, Lucas, Weller, Hayworth, Metcalf, Bono,
Ney, Barr, Chrysler, Cremeans, Fox, Stockman, LoBiondo, Watts,
Kelly, LaFalce, Vento, Schumer, Kanjorski, Flake, Mfume, Orton,
Sanders, Maloney, Barrett, Wynn, C. Fields, Ackerman, Bentsen.
Voting nay: Frank, Kennedy, Waters, Roybal-Allard, Watt.
Mrs. Roukema and Mr. Heineman were present during most of
the markup, but were unavoidably detained with business in
other Committees when the bill was reported by the Committee.
If they had been present they would have voted aye.
committee oversight findings
The Committee in its conduct of its oversight duties under
clause 2(b)(1) of rule X of the Rules of the House of
Representatives held three hearings on the Mexican financial
crisis and the international and U.S. Government's responses to
this crisis.
On January 25, 1995, Messrs. Robert Rubin, Secretary of the
Treasury; Warren Christopher, Secretary of State; Alan
Greenspan, Chairman of the Federal Reserve; Brent Scowcroft,
from the Scowcroft Group; Arthur Laffer, Chairman of A.B.
Laffer; V.A. Canto & Associates; and Ralph Nader, Consumer
Advocate, testified on the Mexican economic situation and
proposed legislation to stabilize the Mexican peso and economy.
On February 9, 1995, Messrs. Greespan and Rubin again testified
before the Full Committee on the Administration's initiative to
stabilize the Mexican economy through the use of resources from
the ESF. Messrs. Robert Reich, Secretary of Labor, and Peter
Tarnoff, Undersecretary for Political Affairs for the
Department of State also testified. On February 10, 1995,
Messrs. Lawrence Kudlow, from the National Review, Rudiger
Dornsbush, Professor of Economics at Massachusetts Institute of
Technology, Clyde Prestowitz, from the Economic Strategy
Institute, Jude Wanniski, from Polyconomics, Inc., C. Fred
Bergsten, from the Institute for International Economics, and
Robert Hormats, from Goldman Sachs also testified on the
subject.
The findings and recommendations of the Committee, as
required under clause 2(l)(3)(A) of rule XI of the Rules of the
House of Representatives, are incorporated in the above
descriptive portions of this report.
committee on government reform and oversight findings
No findings or recommendations of the Committee on
Government Reform and Oversight were received as referred to in
clause 2(l)(3)(D) of rule XI of the Rules of the House of
Representatives.
new budget authority and tax expenditure
Clause 2(l)(3)(B) of rule XI of the Rules of the House of
representatives is inapplicable because H. Res. 80 does not
provide for any new budget authority, any new spending
authority, any new credit authority, or an increase or decrease
in revenues or tax expenditures.
congressional budget office cost estimate
Since the resolution does not provide for any new budget
authority, any new spending authority, any new credit
authority, or an increase or decrease in revenue or tax
expenditures, no Congressional Budget Office cost estimate is
required under clause 2(l)(3)(C) of rule XI of the Rules of the
House of Representatives.
inflationary impact statement
In compliance with clause 2(l)(4) of rule XI of the Rules
of the House of Representatives, the Committee estimates that
H. Res. 80 will have no significant inflationary impact on
prices and costs in the operation of the national economy.
changes in existing law made by the bill, as reported
No change in existing law is occasioned by the passage of
this resolution.
A P P E N D I X
----------
House of Representatives,
Committee on Banking and Financial Services,
Washington, DC, February 9, 1995.
Hon. Robert Rubin,
Secretary of the Treasury,
Washington, DC.
Dear Secretary Rubin: I am writing to request that the
Department of the Treasury prepare and transmit several reports
to the House Committee on Banking and Financial Services
regarding the U.S. and international response to the Mexican
financial crisis. It would be my expectation that these reports
would be transmitted no less frequently than once in each
calendar quarter while any loans or guarantees to Mexico are
issued through the Exchange Stabilization Fund (31 United
States Code section 5302), and thereafter semi-annually while
any such loan or guarantee remains outstanding.
In general, it would be my expectation that the initial
report would provide a detailed legal opinion regarding the
Administration's usage of the authority provided under the ESF
statute for loan and loan guarantee arrangements with Mexico.
The initial report should also address in detail such issues
as: the existence of adequate, assured sources of repayment for
all payments made by the United States in connection with such
loans or guarantees, including proceeds from the sale of
Mexican oil to customers outside of Mexico; any agreement
between the United States and the Government of Mexico (or any
other appropriate Mexican entity) to provide assured sources of
repayment exists for all payments made by the United States in
connection with such loans or guarantees; and the extent to
which proceeds from the sale of Mexican oil to customers
outside of Mexico are pledged or otherwise committed to the
repayment of obligations of the Government of Mexico (GOM) to
sources other than the United States.
In addition, the initial as well as all subsequent reports
should detail the Administration's implementation of the
authority under the ESF statute. Likewise, it should include a
description of efforts by the international community to
stabilize the economy of Mexico and the status of negotiations
with other countries to improve the capacity of international
institutions to handle similar crises in the future.
It would also be my expectation that all such reports would
address in detail Mexico's compliance with the terms and
conditions under which the Administration proposes to use the
ESF facilities, such as whether: Mexico has agreed to use
proceeds of any loan or eligible security for which a guarantee
is issued through the ESF to help strengthen the currency and
help stabilize financial and exchange markets by facilitating
the refinancing or redemption of short-term debt instruments
issued by the GOM; the GOM has agreed to provide a
comprehensive financial plan which includes a description of
the intended use of the proceeds of the loan or security with
respect to which any guarantee is issued, and over the life of
the loan or security with respect to which any guarantee is
issued, ongoing reports on the implementation of the financial
plan; the GOM is respecting the autonomy of the central bank of
Mexico and the mandate of such bank to seek stability of the
purchasing power of the Mexican peso; the central bank of
Mexico is pursuing a non-inflationary monetary and credit
policy that controls credit expansion and the growth of the
Mexican money supply in order to maintain the Mexican peso as a
strong currency, and is providing the Board of Governors of the
Federal Reserve System and other appropriate governmental
entities on a period basis information necessary to make this
assessment, including central bank money supply and monetary
policy data; the GOM is implementing its privatization program
to transfer enterprises currently owned or controlled by the
Government to private ownership; and the GOM continues to
permit entry of foreign direct investments into Mexico and the
repatriation of investments from Mexico by United States
nationals, as required by the laws of Mexico and is pursuing
market-oriented measures to stem the flow of domestically-owned
capital from Mexico.
In addition, all such reports should include an analysis of
the resources which the International Monetary Fund has agreed
to make available in response to the Mexican financial crisis.
The report should include an identification of the percentage
of IMF resources available to Mexico which are attributable to
capital contributions by the United States to the IMF, and an
analysis of the extent to which the IMF's participation in such
efforts will likely require additional contributions by member
states, including the United States, in the future.
The reports should also provide an evaluation of the role
played by the Bank for International Settlements in responding
to the Mexican financial crisis. This section should include a
report on the extent of the financial exposure of the United
States, if any, including the Board of Governors of the Federal
Reserve System, with respect to BIS activities.
Finally, the reports should suggest steps that can be taken
by international financial institutions and the industrialized
democracies to identify and deal with problems of comparably
magnitude in the future.
As you know, Congress has a constitutional duty to ensure
the fullest accountability and transparency of the Executive
Branch in this circumstance. More generally, given the public
controversy surrounding U.S. and international efforts to
stabilize Mexican financial markets, the novel usage of the ESF
statute by the Executive Branch, the $20 billion in new
contingent liabilities assumed by the United States Treasury in
the President's January 31 initiative, it is inconceivable that
any Congressional or public confidence in the Administration's
program can be established absent such reports.
Indeed, the timely issuance of such reports will not only
be relevant to an assessment of the President's initiative in
this instance, but crucial in the context of any future
legislative branch discussions regarding the ESF statute and
the flexibility it provides the Department of the Treasury to
maintain orderly exchange arrangements. I look forward to your
early response to this request.
Sincerely,
James A. Leach,
Member of Congress.
------
House of Representatives,
Committee on Banking and Financial Services,
Washington, DC, February 9, 1995.
Hon. Charles A. Bowsher,
Comptroller General of the United States, Washington, DC.
Dear General Bowsher: I am writing to request that the
General Accounting Office prepare and transmit a comprehensive
report to the House Committee on Banking and Financial Services
regarding the origins of the Mexican financial crisis, the U.S.
and international response, and steps that can be taken by
international financial institutions and the industrialized
democracies to identify and deal with problems of comparable
magnitude in the future.
The report should include an analysis of the causes of the
Mexican financial crisis--including but not limited to the
economic policies pursued by the Government of Mexico, the
position taken by the United States Government on those
policies, and the extent to which our government was aware of
the seriousness of the situation and its potential for
necessitating a major commitment of American resources to
resolve. The role of international financial institutions
should also be carefully examined.
Such report should include the opinion of the Comptroller
General on whether any of the proposed actions of the
President, as announced on January 31, 1995, to use the
Exchange Stabilization Fund (31 United States Code section
5302) to ensure orderly exchange arrangements and a stable
system of exchange rates with respect to Mexico, requires
Congressional authorization or appropriation.
It should also provide a detailed evaluation of the terms
and conditions of the commitments and agreements entered into
by the President, or any officer or employee of the United
States acting on behalf of the President, in connection with
providing such support, including the terms which provide for
collateral or other methods of assuring repayment of any
outlays by the United States.
In addition, it should include an analysis of the resources
which the International Monetary Fund has agreed to make
available in response to the Mexican financial crisis and in
order to restore confidence to the international financial
system. The section of the report should include an
identification of the percentage of IMF resources available to
Mexico which are attributable to capital contributions by the
United States to the IMF, and an analysis of the extent to
which the IMF's participation in such efforts will likely
require additional contributions by member states, including
the United States, in the future.
The report should also provide an evaluation of the role
played by the Bank for International Settlements in
multilateral efforts to respond to the Mexican financial
crisis. This section should include a report on the extent of
the financial exposure of the United States, including the
Board of Governors of the Federal Reserve System, with respect
to BIS activities.
Finally, the report should suggest steps that can be taken
by international financial institutions and the industrialized
democracies to identify and deal with problems of comparable
magnitude in the future.
Because the economic crisis in Mexico has raised a number
of serious issues that merit examination by Congress, I believe
a comprehensive report of this nature is well-warranted at this
time.
Sincerely,
James A. Leach,
Member of Congress.
------
House of Representatives,
Committee on Banking and Financial Services,
Washington, DC, February 15, 1995.
Hon. Alan Greenspan,
Chairman, Board of Governors,
The Federal Reserve System, Washington, DC.
Dear Chairman Greenspan: As you may know, I have written a
letter to the Secretary of the Treasury requesting the fullest
possible disclosure regarding the details of the U.S. and
international response to the Mexican financial crisis. Because
of the role the Federal Reserve System is playing in this
initiative, I would hope that any reports by the Treasury
Department would include supplementary information from the
Federal Reserve or, alternatively, that the Federal Reserve
issue reports on its activity with respect to Mexico.
For example, it is my sense that the Congress is interested
in gaining a fuller understanding of the Federal Reserve's role
in various swap arrangements--such as with the Treasury, other
countries or international financial institutions--as well as
the operational details of the ``pass through'' function of the
Federal Reserve Bank of New York with respect to Mexican oil
revenues from in the event of default, and the Federal
Reserve's relationship with the Bank for International
Settlements.
Because the economic crisis in Mexico has raised a number
of serious issues that merit examination by Congress, I believe
supplementary reporting by the Federal Reserve is well-
warranted at this time. I appreciate your attention to this
request.
Sincerely,
James A. Leach,
Member of Congress.
Enclosure.
H. Con. Res. 27
CONCURRENT RESOLUTION To express the sense of the Congress that the
Secretary of the Treasury should submit monthly reports to the
Committee on Banking, Housing, and Urban Affairs of the Senate and the
Committee on Banking and Financial Services of the House of
Representatives concerning compliance by the Government of Mexico
regarding certain loans, loan guarantees, and other assistance made by
the United States to the Government of Mexico
Whereas Mexico is an important neighbor and trading partner
of the United States;
Whereas on January 31, 1995, the President announced a
program of assistance to Mexico, that includes swap facilities
and securities guarantees in the amount of $20,000,000,000,
using the exchange stabilization fund established pursuant to
section 5302 of title 31, United States Code, and the Federal
Reserve System;
Whereas the program of assistance also involves the
participation of the Federal Reserve System, the International
Monetary Fund, the Bank for International Settlements, the
International Bank for Reconstruction and Development, the
Inter-American Development Bank, the Bank of Canada, and
several Latin American countries;
Whereas the involvement of the exchange stabilization fund
and the Federal Reserve System means that United States
taxpayer funds will be used in the assistance effort to Mexico;
Whereas assistance provided by the International Monetary
Fund, the International Bank for Reconstruction and
Development, and the Inter-American Development Bank may
require additional United States contributions of taxpayer
funds to those entities;
Whereas the immediate use of taxpayer funds and the
potential requirement for additional future United States
contributions of taxpayer funds necessitates congressional
oversight of the disbursement of funds from the exchange
stabilization fund, the Federal Reserve System, and the
International Monetary Fund; and
Whereas the efficacy of the assistance to Mexico is
contingent on the pursuit of sound economic policy by the
Government of Mexico: Now, therefore, be it
Resolved by the House of Representatives (the Senate
concurring), That it is the sense of the Congress that--
(1) the Secretary of the Treasury should, in
conjunction with reports required under section 5302 of
title 31, United States Code, by the 30th day after the
end of each month, submit a detailed report to the
Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on Banking and Financial
Services of the House of Representatives describing,
with respect to such month--
(A) the condition of the Mexican economy;
(B) any consultations between the Government
of Mexico and the Department of the Treasury or
the International Monetary Fund; and
(C) any funds disbursed from the exchange
stabilization fund, including any swap
facilities or securities guarantees, pursuant
to the approval of the President issued on
January 31, 1995;
(2) each report submitted under paragraph (1) should
include, with respect to the month for which the report
is submitted--
(A) a full description of the activities of
the Mexican Central Bank and Mexican exchange
rate policy, including the reserve positions of
the Mexican Central Bank and data relating to
the functioning of Mexican monetary policy;
(B) information regarding the implementation
and the extent of wage, price, and credit
controls in the Mexican economy;
(C) a complete documentation of Mexican tax
policy and any proposed changes to such policy;
(D) a list of planned or pending Mexican
Government regulations affecting the Mexican
private sector;
(E) any efforts to privatize public sector
entities in Mexico; and
(F) a full disclosure of all financial
transactions, both inside and outside of
Mexico, directly involving funds disbursed from
the exchange stabilization fund and the
International Monetary Fund, including
transactions with--
(i) individuals;
(ii) partnerships;
(iii) joint ventures; and
(iv) corporations; and
(3) the Secretary of the Treasury should continue to
submit reports under paragraph (1) until the Secretary
determines that no further risk exists to United States
taxpayers of default by the Government of Mexico on
funds provided from the exchange stabilization fund,
the Federal Reserve System, or the International
Monetary Fund pursuant to the program of assistance
approved by the President on January 31, 1995.