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BA Deere
Honored Advisor

Ah yes remember when, the Peso bailout

The US donated $20 Billion with a "B" and I see the ever so generous Canada gave $1 Billion and along with the IMF the Mexican Peso was bailed out.  And they don`t think they are going to pay for a wall??  Hey Mexico, we give you damned fools hundreds of millions dollars in foreign aid every year, oh I think you`ll pay for a "expletive deleted wall".



In January 1995, U.S. President Bill Clinton held a meeting with newly confirmed U.S. Treasury Secretary Robert Rubin, U.S. Federal Reserve Chairman Alan Greenspan and then-Under Secretary for the Treasury Larry Summers to discuss an American response. According to Summers' recollection of the meeting:

Secretary Rubin set the stage for it briefly. Then, as was his way, he turned to someone else, namely me, to explain the situation in more detail and our proposal. And I said that I felt that $25 billion was required, and one of the President’s political advisers said, “Larry, you mean $25 million.” And I said, “No, I mean $25 billion.” ... There was a certain pall over the room, and one of his [Clinton's] other political advisers said, “Mr. President, if you send that money to Mexico and it doesn’t come back before 1996, you won’t be coming back after 1996.”[8]

Clinton decided nevertheless to seek Congressional approval for a bailout and began working with Summers to secure commitments from Congress.

Motivated to deter a potential surge in illegal immigration and to mitigate the spread of investors' lack of confidence in Mexico to other developing countries, the United States coordinated a $50 billion bailout package in January 1995, to be administered by the International Monetary Fund (IMF) with support from the G7 and the Bank for International Settlements (BIS). The package established loan guarantees for Mexican public debt aimed at alleviating its growing risk premia and boosting investor confidence in its economy. The Mexican economy experienced a severe recession and the peso's value deteriorated substantially despite the bailout's success in preventing a worse collapse. Growth did not resume until the late 1990s.[1]:52[2]:10[4]:376

The conditionality of the bailout required the Mexican government to institute new monetary and fiscal policy controls, although the country refrained from balance of payments reforms such as trade protectionism and strict capital controls to avoid violating its commitments under NAFTA. The loan guarantees allowed Mexico to restructure its short-term public debt and improve market liquidity.[2]:10–11 Of the approximately $50 billion assembled in the bailout, $20 billion was contributed by the United States, $17.8 billion by the IMF, $10 billion by the BIS, $1 billion by a consortium of Latin American nations, and CAD$1 billion by Canada.[9]:20

The Clinton administration's efforts to organize a bailout for Mexico were met with difficulty. It drew criticism from members of the U.S. Congress as well as scrutiny from the news media.[1]:52 The administration's position centered on three principal concerns: potential unemployment in the United States in the event Mexico would have to reduce its imports of U.S. goods (at the time, Mexico was the third-largest consumer of U.S. exports); political instability and violence in a neighboring country; and a potential surge in illegal immigration from Mexico. Some congressional representatives agreed with American economist and former Chairman of the Federal Deposit Insurance Corporation, L. William Seidman, that Mexico should just negotiate with creditors without involving the United States, especially in the interest of deterring moral hazard. On the other hand, supporters of U.S. involvement such as Fed Chair Alan Greenspan argued that the fallout from a Mexican sovereign default would be so devastating that it would far exceed the risks of moral hazard.[10]:16

Following the U.S. Congress's failure to pass the Mexican Stabilization Act, the Clinton administration reluctantly approved an initially dismissed proposal to designate funds from the U.S. Treasury's Exchange Stabilization Fund as loan guarantees for Mexico.[11]:159 These loans returned a handsome profit of $600 million and were even repaid ahead of maturity.[2]:10–11 Then-U.S. Treasury Secretary Robert Rubin's appropriation of funds from the Exchange Stabilization Fund in support of the Mexican bailout was scrutinized by the United States House Committee on Financial Services, which expressed concern about a potential conflict of interest because Rubin had formerly served as co-chair of the board of directors of Goldman Sachs, which had a substantial share in distributing Mexican stocks and bonds.[12]

Economic impacts[edit]

4 Replies

Re: Ah yes remember when, the Peso bailout

Senior Contributor

Re: Ah yes remember when, the Peso bailout



Your impressive  ( not )  diplomatic skills might get you to Farm Bureau, but that's about it, 'bigshot'.

Senior Contributor

Re: Ah yes remember when, the Peso bailout

So they Peso is falling, that makes goods from Mexico cheaper to buy in US$ = more imports.


Is that what you mean?

Re: Ah yes remember when, the Peso bailout

I'm ever more confused over how this Reich is going to figure out a way to keep corporate profits high and lower corporate taxes and yet starve out that mass of 401K boomers who largely cough up the individual contributions that fund the political opposition.

Got a simple solution to that? The still working middle can only get poorer, both in earnings and equity under what is being proposed. That might cause a swing in allegiance. Going to be interesting times.

DOW 30K likely gets this household out fat. Which is horribly unfair in consideration of our ability to create anything tangible being past.