Mexico's Crisis Sparks Debate Over Who Gains by U.S. Policy : Foreign aid: With the GOP's isolationists on the rise, such issues have taken on a new urgency.

TIMES STAFF WRITER

In the Washington that welcomed him two years ago, Robert E. Rubin's Wall Street pedigree was a political boon, lending credibility and gravitas to a young Democratic President anxious to calm jittery financial markets.

But what was once an asset has become Rubin's biggest political liability, turning the treasury secretary into a lightning rod for intense criticism as he takes the lead in the Clinton Administration's controversial bailout of Mexico.

From the nation's talk radio circuit to Capitol Hill, conservative populists and other critics of the Mexican rescue deal have come to see Rubin as a symbol of what they believe is a bailout for Wall Street and a global financial elite. Rubin's background as a co-chairman of Goldman Sachs, the investment banking house that led the charge of American investors into Mexico in the early 1990s, has reinforced the perception among critics that the White House is acting to protect the interests of the moneyed classes.

That anti-Rubin, anti-Wall Street populist strain is now powering an insurgency within the House of Representatives, where a coalition of freshman GOP lawmakers and other hard-right conservatives have succeeded in forcing House Speaker Newt Gingrich (R-Ga.) to call for a vote today in the House Republican Conference on whether President Clinton should be stripped of his authority to bail out Mexico.

If the Republican caucus approves, legislation will be brought directly to the floor of the House to deny Clinton use of the multibillion-dollar fund he is using to help stabilize the Mexican peso. Separately, a House committee is considering convening hearings to investigate whether Rubin, who had the Mexican government as a financial client while he was at Goldman, has a conflict of interest and should be barred from involvement in Mexican matters.

"The voters in my district are furious about this whole deal," complained Rep. Steve Stockman (R-Tex.), who has introduced legislation to kill the Mexican bailout. "They see that we are talking about cutting $100 billion from the budget for our own people and then we are giving money to Mexico. And they see we have a treasury secretary who has a very clear conflict of interest."

One treasury official, however, declared: "I think the charges against Bob Rubin are absolutely outrageous. Here is a man who has done absolutely everything to avoid any conflict."

Yet the underlying debate appears to be about who benefits from U.S. international financial policy. In a political climate in which the Republican Party's long-dormant isolationist wing is on the rise again, such issues have taken on a new urgency.

"This is the ultimate big black hole, and we will get nothing in return for this kind of action except the enrichment of special interests," complained Rep. Dana Rohrabacher, the Orange County Republican who is helping to lead congressional opposition to the Mexican rescue plan.

Clinton Administration officials and independent analysts argued that the populist charge that Rubin designed the rescue package to benefit Goldman Sachs and Wall Street is a straw man with little basis in reality.

Rubin, for his part, has taken extraordinary measures to remove himself from Goldman Sachs and his former life on Wall Street. When he left the firm to join the Administration in 1993, he structured the payout of his multimillion-dollar partnership to ensure that he would not benefit from future profits. He even took out a separate insurance policy on his payout so that he would not have a vested interest in any Goldman bankruptcy. He put all the money in a blind trust and recused himself from dealing with Mexican matters for one year after coming to the White House.

As for the idea that the Mexican rescue package was put together to benefit a few high-rolling insiders on Wall Street, analysts said that is based on an outdated picture of the American financial services industry, The driving forces in the financial markets today are large institutional investors handling the money of millions of individuals. As a result, analysts said, the largest investors in Mexico are actually American pension funds, insurance companies and mutual funds--investing billions of dollars on behalf of individual investors, retirees and insurance policyholders.

Although American investment firms have played a critical role in encouraging and directing investment to Mexico and other emerging markets in recent years, large houses such as Goldman Sachs have acted primarily as middlemen--underwriters, brokers or financial advisers--and have little of their own money at stake in Mexican investments. Goldman, for instance, now has less than $100 million in net holdings of its own in the country, at a time when total U.S. investment in Mexico is now more than $115 billion.

"I defy anyone to point to any large benefits that Wall Street has gotten from this bailout," said Robert Hormats, vice chairman of Goldman Sachs International. More broadly, Administration officials argued that populist suspicions of the financial motivations behind the rescue plan miss the big picture. The overriding motivation for the Administration, officials said, is that stability on the U.S. southern border is clearly in the national interest.

In fact, the best argument in favor of U.S. financial intervention in Mexico, they said, is that a collapse of the Mexican economic system could lead to a dramatic surge in illegal immigration and other border-related social problems.

To generate a sense of urgency, Rubin has also argued that the Mexican bailout is necessary to avert a broader financial crisis throughout the developing world, one that might be sparked by a loss of investor confidence in the financial integrity of other emerging nations. But most independent analysts do not believe such financial concerns would have been enough to prompt President Clinton to act were Mexico not a next-door neighbor.

"I doubt that we would have done anything like this for any other Latin nation, because the immigration issue changes the way we have to deal with Mexico," said William Cline, a Latin expert at the Institute for International Economics in Washington. "The difference between Brazil and Mexico is that we don't have a border with Brazil."

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