---

Subject: Legislative Action Plan for Bailout of Peso
UNITED WE STAND AMERICA
LEGISLATIVE ALERT #4
TO: UWSA TEAM

FROM: Russ Verney

DATE: January 20, 1995

SUBJECT: Proposed Bailout of the Mexican Peso

Since the Mexican government stopped its artificial support of the Mexican currency, the peso has lost approximately 40 percent of its value.

Mexico currently has a public debt in excess of $100 billion. Because of the large debt load and risk associated for investors, approximately $28 billion dollars of their debt is financed with short term (30, 60 and 90 days) bonds, called Tesobonos. To attract investors, Mexico is supposed to pay 20% interest on these short term (junk) bonds. These bonds are in danger of being in default.

Mexico has no U.S. dollar reserves left to pay back the bond holders. Approximately $18 billion of the bonds were sold through Wall Street; and $10 billion are held by Mexican banks and wealthy Mexican investors. There have been 24 Mexican billionaires created since 1991.

In response to the peso crisis in Mexico, the U.S. government has extended a line of credit of $9 billion dollars for the Mexican government to draw on to buy pesos in order to strengthen the value of the peso. In addition U.S. banks (insured by U.S. taxpayers) have put up $3 billion and the Japanese and European governments have put up $6 billion dollars for a total line of credit to Mexico of $18 billion.

Now, the Clinton administration and congressional leaders are preparing an additional $40 billion U.S. taxpayer backed loan guarantee for Mexico. The loan guarantee would back up the sale of $40 billion dollars worth of 3 to 5 year bonds through Wall Street. The proceeds of the $40 billion dollar bond sale would go to the Mexican government.

The Mexican government will use the proceeds of the $40 billion dollar bond sale to repay the $28 billion dollar, 20% interest, short term bonds that are now due and use the remainder of the money at their own discretion.

If the Mexican government pays back the $40 billion dollars of bonds insured by the U.S. taxpayers the U.S. government will receive a fee between $6 billion and $8 billion.

Mexico has defaulted on past debts. In the early 1930's Mexico defaulted on its debt; in the mid 30's Mexico nationalized the petroleum industry, much of it owned by U.S. investors; and in 1982 Mexico again defaulted on its debt.

In recent years the Wall Street investment firm of Goldman Sachs has served as the investment banker for the Mexican government. Robert Rubin was co-chairman of Goldman Sachs during that time. Robert Rubin was recently appointed as Secretary of the U.S. Treasury. As Secretary of the U.S. Treasury Robert Rubin is the architect of the U.S. taxpayer backed bailout of the Mexican government.

Within the last few days Reps. Toby Roth (R-WI), Marcy Kaptur (D-OH) and Duncan Hunter (R-CA) among others have called for congressional hearings on the Mexican peso devaluation and the U.S. bailout of the Mexican government. The new leadership which ran on a platform of open government in the "Contract With America" has stonewalled all attempts to hold public hearings on the Mexican peso crisis.

Some questions that need to be answered are:
* Why did the devaluation of the Mexican peso allegedly take our government by surprise?
* Should the cost of President Clinton's Mexican bailout be reflected in our annual budget deficit spending or should Congress be allowed to put it "off budget" as they propose?
* Have the problems in the Mexican economy that led to this crisis been identified and corrected?
* How will Mexico ever be able to repay this debt?
* Who are the individuals who will receive the repayment on the $28 billion Mexican junk bonds?
* Why shouldn't the Mexican peso be allowed to seek its true value?
* Why shouldn't the gamblers who bought the junk bonds suffer the loss?
* If the devaluation of the Mexican peso by 40% drives up the cost of U.S. made goods in Mexico by 40%, what is the benefit of NAFTA's phased in 10% tariff reductions?
* Should the U.S. withdraw from NAFTA as proposed in HR499, The NAFTA Withdrawal Act of 1995, introduced by Reps. Marcy Kaptur (D-OH), Peter DeFazio (D-OR) and Ron Klink (e not just to secure the interests and reputations of a small, powerful group o f politicians, investment bankers and their corporate clients.

###


John Richard
Essential Information
(202)387-8030

jrichard@essential.org


ACTION
Please ask UWSA members to call, write, fax and visit their Representative and Senators and ask that full public hearings be held before Congress approves any commitment of the good faith and credit of the U.S. taxpayers to bail out the Mexican government .
Please ask UWSA members to call radio talk shows, write letters to the editor, write op-ed articles and issue news releases insisting on public hearings in Congress on the Mexican peso devaluation and the proposed U.S. bailout plan.

---

UNITED WE STAND AMERICA

LEGISLATIVE UPDATE AND ACTION PLAN #14

TO: UWSA TEAM
FROM: Russ Verney
DATE: February 17, 1995
SUBJECT: Legislation Regarding the Mexican Bailout
________________________________________________________________

Members of Congress from both parties have been trying to ignore their
responsibility for President Clinton's Mexican investor bailout on
January 30. Some members of Congress are trying to act responsibly
and have proposed legislation in both the House and the Senate to:

• 1) stop the Mexico bailout as outlined by the President;
• 2) stop this bailout and any future bailouts anywhere in the world;
• 3) get answers to specific background questions regarding the Administration's bailout package; and
• 4) monitor compliance of the present bailout package by Mexico.
  
  Representative Steve Stockman (R-TX) with 17 co-sponsors proposed
  HR807 to protect the American taxpayer from unauthorized use of public funds by an unconstitutional action of the president. Further the bill specifically states no funds appropriated or otherwise made available to Mexico may be used in any way , directly or indirectly, unless Congress has approved such action.
  
  HR867, sponsored by Representative Bernard Sanders (I-VT), with 12 co-sponsors amends Title 31, U.S. Code to place a limitation on budget authority of the Exchange Stabilization Fund. Further this bill, titled the "Congressional Limitation on E xecutive Bailouts Act of 1995" is effective on any loan guarantees, debt swap or credit lines established before, on, or after the date of enactment of the Act.
  Representative Marcy Kaptur (D-OH) with 20 co-sponsors presented
  HRes80 which specifically requests the President to submit information to the House concerning actions taken through the Exchange Stabilization Fund to strengthen the Mexican peso. The bill requires detailed background information on all aspect s of the action by the President and all parties involved.
  
  
  Senator Connie Mack (R-FL) with 10 co-sponsors proposed SConRes6 and the companion House bill, HConRes27 sponsored by Representative Peter King (R-NY) and 17 co-sponsors, both ask the Treasury to submit monthly reports to the Senate and the House Banking Committees concerning compliance by Mexico regarding loans, loans guarantees and other assistance made by the United States to the Government of Mexico.
  Each bill has merit; however, the first three House bills are specific in their efforts to correct the past action of the Administration. These bills specifically identify the Exchange Stabilization Fund and attempt to rectify the errors made. It is imp ortant that these bills have open discussion in the committees and be brought to the House floor for debate and vote.
  There are also two potential law suits. One is being brought by 10 citizens acting as their own attorneys, who allege they were denied their constitutional rights since Congress was circumvented in matters of appropriations, foreign commerce and regulatio n of foreign coin (currency). Any member of Congress who would like to be a party to the law suit can call 518-656-3578 and discuss the matter with one of the plaintiffs.
  The other potential lawsuit is being drafted for consideration by members of Congress.
  The Congressional Fair Trade Caucus will conduct a symposium for members of Congress on "America's Economic Future: Jobs, Trade, and Family Security", February 23 - 24, 1995, in room B369 of the Rayburn House Office Building.
  
  ACTION
  Please ask UWSA members to call, write, fax or visit at Town Hall meetings with their members of Congress during this Congressional recess, February 17 through February 20, and urge them to request a full and open congressional debate on the $20 billion t axpayer bailout of investors in Mexico's debt which was put through without any congressional discussion or their approval.
  

  ---