While Administration officials insisted that they acted under strict provisions of the law, some financial analysts raised the possibility that Clinton could be misusing the Exchange Stabilization Fund by going beyond its short-term mandate and making longer-range loans available. Others criticized Clinton for avoiding Congress.
"I don't care whether it comes out of ESF or EPA. It's still taxpayer money . . . and, when you're going to expose the taxpayers to a $20-billion risk, you ought to have a vote on it in Congress," said Sen. Robert C. Smith (R-N.H.).
Asked why they had not chosen the new course three weeks ago, when they first sought congressional approval of the loan guarantee program only to run into a growing wall of opposition, Administration officials said that Clinton preferred an approach that would give Congress a voice in policy. But the growing urgency of the situation finally demanded unimpeded action, they said.
Jeffrey Schott, a former Treasury official now working at the Institute of International Economics, a Washington policy research organization, said, however, that the delay in acting was more telling than the action itself.
"It has been amply demonstrated that even with the support of the President and the leadership of Congress, the United States cannot act. What does that mean for future attempts to deal with economic problems, whether domestic or international? It damages the nation's reputation and puts up a sign (that) we're still in gridlock city," he said.
In the face of rising opposition to the original plan, Clinton met in the Oval Office on Sunday morning with key officials to begin forming a fallback plan.
They agreed it was imperative that congressional officials prepare legislation authorizing the original $40-billion plan by Monday or the entire effort would collapse--a timetable Clinton passed along that afternoon to House Speaker Newt Gingrich (R-Ga.), Senate Majority Leader Bob Dole (R-Kan.), House Minority Leader Richard A. Gephardt (D-Mo.) and Senate Minority Leader Tom Daschle (D-S.D.).
The congressional leaders were pessimistic about putting together a bill that would satisfy deeply skeptical legislators on both sides of the aisle.
By midday on Monday, Gingrich told Panetta that he was having trouble keeping Republicans on board. Gephardt, whose problems with Democrats were even greater, had not been heard from.
Finally, shortly after 8 p.m. Monday, Gingrich called the White House and broke the news: The legislative package was dead.
Treasury officials immediately began work on a plan using the currency stabilization fund to prop up the peso, and they called central bank and International Monetary Fund officials to line up support from other lenders.
Clinton convened the bipartisan leadership in the Cabinet Room at 8:45 a.m. to announce terms of the deal.
Times staff writers Mark Fineman in Mexico City, Doyle McManus in Boston and Michael Ross in Washington contributed to this story.
* BACK FROM BRINK: Last-minute loans help Mexico avert economic disaster. D1
Why the Peso Matters
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