Republicans in Congress, especially in the House, reacted to the arrival of the Mexican peso crisis like a bridegroom would welcome an ex-boyfriend of his bride crashing the wedding reception. Call it stunned incomprehension. Why is this happening?
Let’s put this into context: Here are the Republicans, busily and happily running the country. A few distractions along the way, to be sure – a book-deal flap here, a House-historian flap there. In addition, professional conservatives in town are cranky about the balanced-budget amendment and its tax-limitation provision as detailed in the GOP’s “Contract With America.”
But, by and large, things are going well. The Congressional Accountability Act, whereby Congress applies the laws of the land to itself, has sailed through to final passage in both chambers and been sent to the president for his signature. Hearings on all the other stuff in the contract are under way. The House is getting together a balanced-budget amendment that can pass. No one has seen the Clinton administration.
And then, the Mexican peso crisis – with which there are two main problems on Capitol Hill. First, no one has time for a Mexican peso crisis right now. Second, no one has a clue about what the Mexican peso crisis is.
Oh, sure, the broad outlines are clear: The peso’s exchange rate is supposed to fluctuate against the Yankee dollar only within a certain range, and all of the sudden, it’s in the tank. Which means I but nobody on Capitol Hill seems to know what it means.
All anybody knows for sure is that it’s a crisis. Nominal President Clinton says it’s a crisis, but never mind him; Alan Greenspan, the chairman of the Federal Reserve System, says it’s a crisis, and when Greenspan says it’s a crisis, it’s a crisis. So Fed Factotum-in-Chief Clinton phones House Speaker Newt Gingrich and Senate Majority Leader Bob Dole and asks them to come to the White House as an urgent matter of national security to deal with the crisis. Now, of course we must put partisan differences aside when it comes to matters of national security and rally around our president – in this case, Greenspan.
So into the White House they went, and out of the White House they came, to announce that this problem was nothing a $40 billion U.S. loan guarantee to the Mexican government couldn’t solve. Then the speaker and the majority leader went home, leaving Nominal President Clinton to work on the draft of Book 7 of his State of the Union message.
The speaker, clearly, was hoping for a quick turnaround on the loan guarantee to get it over with: Hearings at noon, committee markup at 2 p.m., floor debate at 3 p.m., final passage at 3:09, then back to the contract. On the Senate floor, Snarlin’ Bob Dole was watching Robert Byrd of West Virginia obstruct the passage of Dole’s pet unfunded-mandates bill by declaiming at length on the virtues of his dog and the strength of the Roman Senate. Thus, the majority leader welcomed the opportunity to say that the Senate would take up the loan guarantee as soon as it completed action on unfunded mandates – that is, make Byrd shut up and we’ll get on with it.
And then, depression set in. For it occurred – if not to the speaker and the Senate majority leader themselves, then at least to a couple of the people around them – to ask, “Why are we doing this?”
The question was about as welcome as the ex-boyfriend crashing the wedding reception to get up on the podium to offer his personal reflections on the bride. Because all of a sudden the Mexican peso crisis no longer was something that was going to be resolved quickly in a bipartisan manner in the interest of national security according to the wishes of the Greenspan White House. Now, all of a sudden, members of Congress were going to have to understand the peso crisis.
This was not good.
In addition, the vox populi was not happy about the situation, either. The vox populi was suffering from a hearing disorder whereby “$40 billion loan guarantee for Mexico” was sounding like “$40 billion U.S. taxpayer bailout for Mexico.” The vox populi was against this. In general, the vox populi was increasingly convinced that Mexico doesn’t have any problems a strong, tall fence wouldn’t solve.
This was not good either.
So here we are: Members of Congress are scrambling to understand international currency markets to prepare for a vote on legislation that, if they follow their own leadership and support, will cause the folks at home to rip their livers out.
I, for my part, am sure I do not have a great deal to contribute to public understanding of international currency markets. I would only point out that neither do a lot of the people whose job it is to follow these things at the Treasury Department, for example, and major investment banks. The message throughout the fall and early winter was that the peso looked good. Then, only a week before the crash, officials acknowledged a problem but thought it was nothing $18 billion couldn’t fix. Those same guys now say $40 billion. How high is up?
What I do know is that there are many people who got stuck holding pesos, or Mexican government bonds (called tessobonos) pegged to the dollar that Mexico can’t repay without flooding its economy with pesos. What I also know is that these are the same people who looked for investment opportunities in Mexico because of the sky-high returns such investments were generating before the peso collapsed. Hmm. High returns in exchange for high risk.
Sounds fine to me. Members of Congress shouldn’t have a bad conscience about pandering to voters by letting the Mexico deal die. They should let the Mexico deal die on principle. And they should get on with their party.