Key House Panel Resists Push for Mexico Aid Plan

Skeptical members of a key House committee, Democrats and Republicans alike, threw cold water Wednesday on the Clinton Administration plan to guarantee $40 billion in private loans to prop up Mexico’s ailing economy.

House Speaker Newt Gingrich (R-Ga.) said that if a vote were taken now, Congress would not approve it.

Members of the House Banking and Financial Services Committee turned aside quiet, but insistent, pleas by Secretary of State Warren Christopher, Treasury Secretary Robert E. Rubin, and Federal Reserve Board Chairman Alan Greenspan that they ignore the political passions building around the measure.

In an effort to overcome opposition, some of it from Democrats, the Administration began considering whether to attach a “side letter” to the agreement--much as the White House did to win approval of the North American Free Trade Agreement in 1993--addressing issues related only in the loosest sense to the Mexican financial crisis, among them immigration enforcement.

Meanwhile, Administration officials and congressional leaders conceded that it would be at least another week before the loan program is presented to the House and Senate for a vote.

The precarious support for the program was illustrated by Rubin in an interview with a group of reporters after his nearly five-hour grilling by the House panel.

To a suggestion that no one in the hearing room had rallied to his defense, Rubin referred to the secretary of state and said wryly: “Christopher did.”

The Treasury secretary acknowledged the political bind in which members of Congress find themselves: Although the measure is considered crucial to American jobs, it has the aura of bailing out a developing nation with U.S. funds.

“There is a broad-based recognition of the importance of this issue (but) politically it is very difficult for these people,” he said after the hearing.

Greenspan and the Cabinet members told the House panel that, besides putting at risk U.S. jobs tied to Mexico’s economic health, failure to approve the plan eventually would threaten economic growth in developing nations around the world.

It would threaten to reverse Mexico’s economic modernization, Greenspan said, and spread “Mexico’s financial difficulties to other emerging markets (and) halt or even reverse the global trend toward market-oriented reform and democratization.”

“This would be a tragic setback not only for these countries but for the United States and the rest of the world as well,” he said, adding in a later appearance before the Senate Finance Committee that the Mexican crisis is a demonstration of how quickly failing investor confidence can trigger flights of capital.

But the committee members’ questioning, in both the House and Senate, made it clear that three weeks of intensive campaigning by the Administration and Greenspan, capped by President Clinton’s own lobbying for the plan in his State of the Union message Tuesday night, had gained no ground for the plan.

But Gingrich, while telling reporters that the plan would fail if put to a vote today, expressed confidence that it eventually would be approved, although “the President is going to have to spend more time and more effort explaining why this is important. . . .”

That theme was echoed by Rep. Toby Roth (R-Wis.), who told Rubin, Christopher and Greenspan: “The problem the Administration has is you have not convinced the average Americans they should stand behind these guarantees.”

Under the plan worked out by Administration officials, representatives of the congressional leadership--which generally supports the loan program--and Mexican officials, Mexico would pay a still-unspecified fee to the Treasury in return for the U.S. government’s pledge that it would make good on Mexico’s debts, up to $40 billion, to private lenders if Mexico defaults on its borrowing.

Supporters of the plan have portrayed it as a crucial step in helping Mexico recover from the sharp decline in the value of the peso that occurred in December.

With Mexico firmly positioned as the United States’ third-ranking trading partner, and the Administration estimating that 770,000 U.S. jobs depend on exports to Mexico, Rubin took pains to present the program as one that would benefit workers in this country as much as it would help Mexico.

And the new Treasury secretary also went out of his way, both in his testimony and again in a meeting with reporters, to emphasize that it is not the major investment banks the Administration is seeking to protect, but the average investors whose financial security rests with mutual funds and pension funds that have invested in Mexico and the emerging markets of developing nations.

“I don’t think any of us would have the slightest interest if this were a question of bailing out wealthy investment firms,” said Rubin, who was co-chairman of Goldman, Sachs & Co., one of Wall Street’s most successful investment houses, before he joined the Administration in 1993.

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