"Senators who refuse to rein in the IMF bailout of European creditors are foolish. They are enabling a new faceless global ruling elite of financial institutions to run roughshod over representative governments in Europe and elsewhere."—ALG President Bill Wilson.
June 23rd, 2011, Fairfax, VA—Americans for Limited Government President Bill Wilson today urged the Senate to roll back a $100 billion expansion of the International Monetary Fund (IMF) that was enacted in 2009.
"It is simply outrageous that the world's largest debtor, the United States, is bailing out creditors in Europe that bet poorly on Greek and Irish debt," Wilson said.
"We need to get our own fiscal house in order before we get in the business of bailing out the world from its own foolish overspending," he added.
The expansion that passed in 2009 contained the SDR equivalent of $100 billion on the date of the agreement and increased the U.S. share in the IMF by Special Drawing Rights (SDR) 4.97 billion at a cost of $8 billion. This compares to the $10 billion line of credit to the IMF worth SDR 6.6 billion prior to the expansion.
The amendment, offered by Senator Jim DeMint, would roll back the $100 billion credit line to the IMF, and is expected to be voted on later today.
The expansion had fulfilled an Obama Administration G-20 pledge as part of a $550 billion global effort to bolster the international bank. The G-20 then approved a new $250 billion general allocation of SDR — the bank's reserve asset.
Since then, the IMF expansion has been used as part of the European Union and European Central Bank's (ECB) bailouts of international creditors of Greece (110 billion), Ireland (85 billion), and Portugual (78 billion). "The IMF-EU-ECB bailouts are nothing more than kick-the-can refinance loans that do nothing to help these insolvent sovereigns to restructure their debts," Wilson noted.
After receiving its 110 billion in refinance loans, Greece still cannot sell its debt privately, and that nation's creditors are back for another bailout that could total anywhere from 80 to 100 billion.
Proposals that creditors instead take losses on their loans and allow these countries to restructure their debts have been overruled by bank ministers including the ECB Jean-Claude Trichet and U.S. Treasury Secretary Timothy Geithner.
Wilson explained the danger, "Whichever states borrow money from these creditors are risking losing their sovereignty. They should be allowed to restructure their debts, the creditors should take their losses. Nobody forced them to lend the money."
"Senators who refuse to rein in the IMF bailout of European creditors are foolish. They are enabling a new faceless global ruling elite of financial institutions to run roughshod over representative governments in Europe and elsewhere," Wilson added, concluding, "The sad truth is American taxpayers, by financing the IMF, are underwriting the destruction of representative government in Europe that their fathers and grandfathers fought and sacrificed their lives to defend."