Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: rich4eagle who wrote (216413)	1/10/2002 2:44:47 AM
From: CYBERKEN	Read Replies (1) \| Respond to of 769670

Your tendency to revise history to glorify the most corrupt and incompetent public official ever elected requires not just ignorance (your speciality) but comprehensive lying. So now you know what it's like to be a slimy left wing Clinton cultist...

To: rich4eagle who wrote (216413)	1/10/2002 8:46:47 AM
From: Neocon	Read Replies (1) \| Respond to of 769670

It had nothing to do with support of NAFTA, and the Republican leadership was on board with Clinton: President Clinton Opts for Rescue President Clinton opted for rescue and he was supported in this position by the Secretary and Under Secretary of the Treasury (Robert Rubin and Lawrence Summers), and the Chairman of the Federal Reserve Board (Alan Greenspan). Alan Greenspan's support carried much weight in the Congress because he was seen as politically independent. The fear of the Treasury and Fed was that a Mexican financial collapse would lead to financial contagion in the United States itself. The concern of the State Department was that allowing the Mexican drama to play itself out would lead to internal social instability and that this would result in increased illegal immigration into the United States. President Clinton first secured the support of the Republican leaders in the House and the Senate, Speaker Newt Gingrich and Senator Bob Dole, before he submitted his proposal for a $40 billion loan to support Mexico. The backing of the two leaders did not do the job and when it was clear that the legislation would not succeed, it was withdrawn. It was replaced on January 31 by a support package that exceeded $52 billion, although not all the money was drawn by Mexico. Of this, $20 billion came from the Exchange Stabilization Fund controlled by the U.S. Treasury, $17.8 billion from the International Monetary Fund, and the remainder from many central banks, mostly operating through the Bank for International Settlements. The ESF had not been used before for such a large and potentially durable bailout and questions were raised about the legality of the action. The General Accounting Office, in its report on the rescue package, speculated about the justification in using the ESF in this way, but conceded that it was legal. The ESF option was not chosen first for two reasons: concern that the criticism would reduce future Treasury flexibility in using the fund; and the desire to build the total package to at least $40 billion, and it was deemed that the funds in the ESF were insufficient for such large usage. Two other objections were raised to the rescue. The most basic was that it would not work and the U.S. government would be the loser, notwithstanding an escrow account in the New York Federal Reserve Bank based on Mexican oil sales in the United States. The second was the issue of moral hazard, that investors who made risky investments in order to obtain higher returns, should not be bailed out. The first objection disappeared when the loan, made at a penalty interest rate, was repaid in full by Mexico before the due date. The moral hazard issue remains and became a major issue later in the unfolding of the Asian financial crises in 1997. Mexican President Zedillo chose to use shock treatment to correct Mexico's internal economic and balance-of-payments problems. Consequently, Mexico's gross domestic product plunged by almost 7 percent in 1995, but recovered sharply in 1996 and subsequently. Almost all the tesobonos were retired in 1995 and Mexico's external debt has been lengthened. Mexico had suffered currency shocks on a regular pattern every six years starting in 1976, generally coinciding with presidential elections, but thanks to the post-bailout economic policy, there is no expectation that this will recur in 2000. Sentiment in the Congress opposed the bailout, as did public opinion. Yet, the rescue worked and Mexico has been stronger economically ever since. There are many reasons why the Institutional Revolutionary Party was ousted peacefully from the presidency after 71 years in the 2000 presidential election, but public memory of the hardships in 1995 surely contributed to dissatisfaction with the PRI. What is evident is that President Clinton, with the support of his key economic advisors and the chairman of the Fed, took courageous action in the face of substantial opposition to carry out a rescue package, the largest of its kind as of that date. The rescue clearly accomplished its central objectives of leading to economic stabilization in Mexico and preventing whatever financial contagion there might have been in the United States in the aftermath of a Mexican default. csis.org