("Quid coniuratio est?")
THE MEXICAN RESCUE PACKAGE
[From The Congressional Record -- House, H1271-H1278, Feb. 6, 1995]
[...continued...]
MR. SANDERS:
Mr. Speaker, if the gentlewoman will yield, in Sunday's
Washington Post Raul Avila, president of the National Maquiladora
Industry Council, said that during the first 10 months of 1994
maquiladora employment increased 6.2 percent, over 600,000
employees, and importantly enough, as the gentlewoman has just
indicated, "The industry forecasts the opening of another 600
assembly plants this year."
MR. DeFAZIO:
If the gentlewoman will yield, that, I believe, was because of
the drop in the value of the peso.
MR. SANDERS:
The gentleman is exactly right. With cheaper labor it becomes a
better investment in the maquiladoras, and we can expect more
American companies to be going down there.
The gentleman and the gentlewoman raised interesting points a while ago. I am a member of the Banking Committee that dealt with the S&L fiasco, and as my colleagues will recall the concept "too big to fail." Do my colleagues remember that concept? What too big to fail means is that the taxpayers of America were obligated to bail out very, very large banks because if they failed, the repercussions of that failure were supposedly so great that it would have been worse than bailing them out.
I would like my colleagues to comment on this thought. It seems to me that that is precisely what is happening with regard to Mexico. We are now asked, well, not asked, but the President is proposing to put $40 billion of loan guarantees into Mexico. Maybe the President is right and we do not know. Maybe, in fact, this will improve the Mexican economy, everything will work out well, and there will not be a loss of taxpayer money. That may be true.
But let us look at the other side of the story. Maybe in fact the Mexican economy will not improve and we will lose that $40 billion. What I would like to ask my colleagues is this: Is it not possible that a year from now or 2 years from now a President will come back and say we have got to provide even more loan guarantees to Mexico because we already have $40 billion in the hopper there; we cannot afford to lose that. We have to protect that investment and, therefore, we need to put even more money into Mexico?
And I think the implications of that are very, very frightening. This Congress and this President are having a difficult enough time running the American economy that we know something about on behalf of American workers. We are not doing very well at that.
The idea that we have the knowledge or the ability to sustain the Mexican economy, upon which we are dependent, is really quite beyond me.
But I am afraid that we are going to have this too-big-to-fail concept once again. Then we are going to have to pump more and more money into Mexico, because if it fails, then we have lost all the money we put into them last year.
MR. DeFAZIO:
I guess to bring it down to something smaller than billions, I
think I heard very early on in my life and the old saw, you know,
"If you owe the bank $1,000 and you cannot pay, you have got a
problem. If you owe the bank $100,000 and you cannot pay, the
bank has got a problem." That is where we are at here.
It is not only ultimately an obligation of the economic stabilization fund, and it does occur in here that losses can be incurred, and those losses would have to be made up, but also the interest earnings, gains or losses of the economic stabilization fund are reflected in the budget of the United States of America. So if the economic stabilization fund loans to Mexico, $20 billion or so to Mexico go bad, then suddenly we are told that not only do we have to come up with the money but that counts as $20 billion more deficit for the United States of America.
MS. KAPTUR:
On that point, if you look at what we are spending on as a
Nation, the very first set of categories have to do with Social
Security, and especially Medicare, the cost that the taxpayers
subsidize Medicare. Defense is a large expenditure. Then comes
interest rates. Right after that, the fourth largest category of
spending in this Government is to pay the interest on the savings
and loan bailout which totals over $1 trillion. Our children's
children will be paying for that.
So when we get in these debt financing arrangements, what we are talking about is obligating the people of our country so far down the road you can hardly even see the end of it.
But in this situation with Mexico, we are not talking about money we owe to ourselves. We are talking about money that is owed to investors and creditors to foreign nations. This is a very different animal than that exchange stabilization fund was meant to be used for in the past.
I think what we are seeing is a different form of foreign aid, which does not have to be voted on here in the Congress, and that is not how a democracy should function or a democratic republic should function. We should have the debate here. We as a people must make a decision about what our relationship is to various countries around the world.
MR. SANDERS:
My recollection -- and help me out here -- is that foreign aid
that we do vote on is about what, $15 or $16 billion?
MS. KAPTUR:
That is right.
MR. SANDERS:
There is a lot of debate. Many people throughout this country
think that is too much.
MS. KAPTUR:
Half of that is weapons.
MR. SANDERS:
All right. What we should appreciate is that this loan guarantee
to Mexico puts us at risk for over double what our entire foreign
aid package is today. Is that correct?
MS. KAPTUR:
That is correct. The gentleman is correct. I kept listening to
the President when he said, "Oh, this is not anything serious.
This is just cosigning a loan." I would say to the gentleman from
Oregon and the gentleman from Vermont what if someone came up to
you and said, "Would you sign a loan with me for $50,000? Right
now, sign it?"
MR. SANDERS:
For you, Ms. Kaptur, absolutely
MS. KAPTUR:
But maybe you do not know what my finances are like. I mean,
would you not want to know the credit history of that person,
what kind of assets the person had? And there is absolutely a
risk that something might go wrong. Cosigning the loan does not
absolve risk.
MR. SANDERS:
I was on a national television program the other day and one of
the proponents of this bailout was saying, well, the Mexican
economy is basically in good shape; they are having a short-term
cash flow problem. But basically it is strong. One of my
colleagues here talked about the national debt of Mexico. Is, in
fact, the Mexican economy strong and stable?
MS. KAPTUR:
The Mexican economy is not strong and stable, and the nation is
not politically stable, which is why there is all of this moving
up and down of the value of the peso. Mexico owes somewhere
between $160 and $200 billion. That is with a "b". That is in
public debt that is owed to other creditors. This is only one
small piece of it. This is probably the piece that they thought
they might be able to bite off without too many people
disagreeing, but there is a lot more money owed, and then inside
Mexico, because of the strange relationship between their private
sector and their public sector and their banks, there are all
kinds of debts internal to Mexico, and with interest rates going
up there and with the inflation rates going up, it is a very
unstable economic situation inside of Mexico.
The value of their money has just been cut in half. Lots of businesses there have loans. The relationship of those businesses to their banks, to the inflation rate, et cetera, is a very unstable situation, and the largest revenue generator to the Government is Pemex, the oil company.
Over, I think, nearly half the revenues of that Government are generated by Pemex, so that is another place that the oil revenues are pledged as collateral to their own Government.
I happen to believe that Mexico's main problems are not economic but, rather, social and political; in other words, if you could get a system there that operated in a more democratic fashion, could you begin to put the pieces in place of an economic order that shared the wealth with the vast majority of people rather than just a few people on top.
MR. SANDERS:
The main point I wanted to make very briefly is that it is not
for sure that this $40 billion loan guarantee is without
significant risk, and that is the main point I wanted to make.
MS. KAPTUR:
It is absolutely with significant risk.
MR. DeFAZIO:
I think this was a question I asked very early on when I was
contacted, when I filed my legislation to withdraw from NAFTA.
They brought up all of these concerns about how it would further
destabilize the economic situation. They said we are only
cosigning, and I said, well, I understood if someone had
impeccable credit they would not need a cosigner. Usually you
want a cosigner because no one else wants to extend you credit,
and they think maybe you would not be good for it. If Mexico's
credit is so great, I suggest they go to the same Wall Street
financiers who have made 20- to 50-percent interest, nice rate of
return, and perhaps say, "Look, you have been making a lot of
money down in Mexico, how about extending some loans on favorable
terms, maybe only 15-20 percent interest per year as opposed to
what we have been paying you, still better than you can get
generally in the United States stock market, S&P index, United
States Treasury, better than you can get anywhere else."
I would assume the Wall Street financiers, thinking there is no problem, if they want the Government to cosign, why do not they just do it directly? Why do not they do it themselves? They are telling us we will make money on this. The taxpayers might make money on it. Might lose $40 billion on it, but, this is a river boat gamble. We are river boat gamblers with $40 billion of assets of the United States of America that belong to the people of this country. I do not think so. That is not our role here. Let the people on Wall Street be the river boat gamblers, not the people on Main Street.
MS. KAPTUR:
I am telling you, if those people on Wall Street and in the banks
around this country made as risky investments as this group did
down in Mexico, our entire banking system would be in a state of
collapse.
MR. SANDERS:
Essentially what we want is two things. We need far more
information about this bailout and, second of all, and most
importantly, we want the U.S. Congress, which presumably was
elected to represent the American people, to be able to vote this
thing up or down, and in my view, the Congress would vote it
down.
Now, I think if the American people are upset about this process, it is terribly important that they stand up, they tell the President and the Republican leadership that they understand what is going on, that they want a vote on the floor of the House, they want the Members of Congress to represent their interest and not put $40 billion at risk.
So we hope very much that the people will stand up, fight back, and start calling their Members of Congress, the President's office, and the leadership to demand a vote on this important issue.
MS. KAPTUR:
I want to thank the gentleman from Vermont [Mr. Sanders] for
joining us this evening, the gentleman from Oregon [Mr. DeFazio],
the gentleman from Mississippi [Mr. Taylor], and the gentleman
from Ohio [Mr. Brown].
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USA Today, Feb. 8, 1995, very tiny item: Mexico Plan Foes Fail: Opponents of President Clinton's $20 billion rescue plan for Mexico's embattled peso failed to dramatize their opposition through a resolution seeking to reassert Congressional authority over government spending. Critics lost a 288-143 floor vote that would have allowed debate on the matter. -- Juan J. Waite.
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Washington Times, National Weekly Edition, Feb. 20-26, 1995: House will debate peso bailout: In a sharp reversal, House Republican leaders will accede to demands from GOP freshman [and others] and allow full floor debate on President Clinton's $47.5 billion bailout plan, which bypassed Congress.
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NBC News, Bill Moyers commentary, Feb. 21, 1995 -- a good commentary in which Moyers asks good questions about the bailout. But notice that the commentary and the questions arrive after the thing is already a fait accompli.
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[Copies of The Congressional Record are normally available for viewing at your local library.]
I encourage distribution of "Conspiracy Nation."
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