Adventures in the Zone of Twilight: Separation of Powers and National Economic Security in the Mexican Bailout

By Covey, Russell Dean | The Yale Law Journal, March 1996 | Go to article overview

Adventures in the Zone of Twilight: Separation of Powers and National Economic Security in the Mexican Bailout


Covey, Russell Dean, The Yale Law Journal


Introduction: Was the Mexican Bailout Legal?

On January 12, 1995, President Clinton requested legislation providing $40 billion in loan guarantees to prevent Mexico from defaulting on bonds worth billions of dollars. Less than three weeks later, the President preempted the ongoing congressional debate on the guarantees and, without any formal congressional action, unilaterally negotiated a combination of additional loans from international institutions (the International Monetary Fund (IMF) and the Bank for International Settlements (BIS)) and promised Mexico $20 billion from the Exchange Stabilization Fund (ESF), an obscure revolving fund in the Treasury normally used to stabilize the dollar on world currency markets.(1)

It is far from clear that the President had the legal authority to take this action. While the administration claimed to be responding primarily to the dramatic devaluation of the peso, the main purpose of the loans was not to restore the value of Mexico's currency, but to prevent its looming default on dollar-denominated securities threatened by the depletion of its hard-currency reserves, and thereby to boost confidence in Mexican markets and curtail further capital flight.(2) U.S. aid was extended not through intervention in exchange markets to prop up or stabilize the Mexican currency, but rather through a package of loans and loan guarantees provided directly to the Mexican government.(3) The package was thus only incidentally an act of "currency stabilization," and is more accurately described as a grant of foreign aid.(4) In other words, it was a classic case of government "bailout,"(5) though one of virtually unprecedented magnitude.(6)

In taking this unilateral action, President Clinton received praise from congressional leaders.(7) Republican Speaker of the House Newt Gingrich called the action "courageous."(8) Congressional leaders from both parties further agreed that the President had the statutory authority to deliver the funds to Mexico without any subsequent congressional authorization or appropriation.(9)

Nonetheless, a significant number of Senators and Representatives opposed the plan and questioned its legality.(10) Ultimately unsuccessful attempts were made in both the House and Senate to prevent the package from proceeding or to curtail aid already being delivered.(11)

Though the Mexican bailout is substantially complete, the doctrine of separation of powers requires a close look at the use of revolving funds like the one employed to aid Mexico, particularly when such funds are drawn on without congressional authorization.(12) This Note argues that the ESF was used improperly and that, despite the informal approval of congressional leaders, President Clinton had neither statutory nor constitutional authority to extend the aid package to Mexico in the absence of a formal congressional appropriation. Though the President's admittedly substantial latitude to act in matters affecting national security might have provided him with the emergency authority to preempt the legislative process and spend unappropriated dollars, this Note argues that such preemption remains illegal, at least until Congress ratifies the appropriation retroactively.(13)

Part I examines the statutory authority claimed by the administration to fund the bailout. It argues that the statute relied upon by the President,(14) the legislative history of the relevant provisions, the historical use of the ESF, and statements made by administration officials all indicate that there was no statutory authorization for the administration's use of the Fund. Part 11 analyzes the constitutional issues raised by the bailout under the framework set forth by Justice Jackson in Youngstown Sheet & Tube Co. v. Sawyer; it concludes that the President lacked the necessary constitutional authority Jackson's framework suggests must exist in the absence of congressional authorization.(15) Even if authorization may be inferred through a more liberal interpretation of the statute's text and history, Congress has never established any "intelligible principle" to guide the use of the Fund.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Adventures in the Zone of Twilight: Separation of Powers and National Economic Security in the Mexican Bailout
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.