American Taxpayers On The Hook For European Bailouts
It’s bad enough that the Federal Reserve is joining with central banks in Europe to flood the markets with currency in an attempt to rescue the EU from a fiscal implosion. More money in the markets means inflation, which in turns makes us all poorer.
But keep in mind that the G20, of which the US is a part, gave the International Monetary Fund broad authority to make loans. With the IMF bailing out the European states, and with the American taxpayer the biggest contributor to the IMF, if those bailouts go sour we’ll take it in the shorts more than anyone else in the world.
So far, no one has floated publicly the idea of the U.S underwriting a broader bailout of the European financial system. But Senate Republicans have already voiced concerns over such a move.
“Our concern is that innocent American taxpayers will pay for yet another bailout — this time to one or several countries whose spending and debt choices led them to financial calamity,” Sen. Orrin Hatch, R-Utah, and seven other Republican senators wrote in a letter to Treasury Secretary Timothy Geithner in June.
The source of the senators’ concern is an emergency provision, approved by the Group of 20 industrialized nations in 2009, granting the IMF broad powers to expand its lending authority. That could leave American taxpayers on the hook for any IMF loans that later go bad.
The IMF’s lending authority was tripled to $750 billion in 2008. Now some are warning that $750 in bailouts for Europe might not be enough:
Investors have become increasingly worried that a $740 billion euro EU bailout fund isn’t big enough to cope with potential losses if Greece and other countries default on their debts, wiping out those assets held by European banks.
But don’t worry, according to Secretary of the Treasury Tim Geithner, “The United States has never experienced a loss on its IMF commitments.”
Right, and the US Government never owned a car company before. But that happened.Tags: ben bernanke, deficits, international monetary fund, national debt, tim geithner