The government permitted a financial environment which enabled borrowers to rely excessively on short term loans foreign currency loans, which were artificially cheap. The international community, led by the International Monetary Fund, with additional support from Japan, Europe, and the United States, has placed its faith in large financial rescue packages. Supporters of financial bailouts point to past successes, including the recent Mexican bailout of 1995. The U.S. administration is confident that, as in Mexico, the IMF and the United States can play a crucial role in turning the crisis around, through a combination of large-scale financing and tough policy conditions. However, the rationale behind, and policy content of, rescue packages remains contentious.
Some economists claim that such reform are counterproductive and unnecessary.
In fact, more money was committed to Mexico than was actually used, and Mexico repaid the United States in full, with interest, well within the loan repayment period. Critics have also been concerned about the IMF s role in the bailouts, and there have been challenges from a number of directions. One set of critics argue that still more fundamental adjustments than those proposed by the IMF are required, and are sceptical that the reforms agreed to will actually be met. Another group of critics question the appropriateness of the bailout conditions set for Asian economies. He argues that the crisis has been fuelled by the herd mentality of investors.