That was Americans for Limited Government (ALG) President Bill Wilson’s take on a recent Congressional Research Service (CRS) report published in September that showed the International Monetary Fund (IMF) has already dispensed €78.5 billion to the creditors of Greece, Portugal, and Ireland, or about $112 billion for refinance bailout loans.
The U.S. provides 17.72 percent of the IMF’s finances. Which means the “U.S. taxpayers’ tab is already almost $20 billion so far that the IMF has put at risk,” Wilson noted.
He urged members of Congress to resist any further U.S. role in providing financial assistance to Europe to alleviate the sovereign debt crisis, saying, “It’s not up to the American people to bail out European banks that bet poorly on the sovereign debt of socialist governments that could not afford to be paid back.”
According to the CRS report, Europe’s various efforts through the €440 billion European Financial Stability Facility (EFSF) have been “backstopped by various forms of assistance from the U.S. Federal Reserve Board (FRB) and the IMF.”
A staunch opponent of bailouts, Wilson was not happy, saying, “The bailout of European banks is already taking place under the noses of members of Congress and is putting U.S. taxpayer resources at risk, whether through the IMF or the Federal Reserve.”
Wilson warned representatives and senators that there were multiple avenues the government was moving bailout monies into Europe, “It’s not enough just to stop the IMF. It’s got to be comprehensive.”
He recently sent a letter urging members of Congress to adopt legislation that would prohibit a U.S. bailout of European banks, whether through the International Monetary Fund, the Federal Reserve, or any other institution.
Member states of the Eurozone have recently voted to leverage the €440 billion EFSF to at least €1.4 trillion, with the IMF being considered as the primary vehicle for the leverage. If so, Wilson warned in his letter that “U.S. taxpayers could be on the hook for more than 17 percent of the bailout: at least €170 billion, or $235 billion.”
Wilson cautioned that the IMF’s role makes taxpayers responsible for Europe’s debts when the U.S. is already the world’s largest debtor with a debt of over $14.9 trillion.
He added, “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.”
Wilson’s call comes as House Speaker John Boehner and U.S. Treasury Secretary Timothy Geithner met to discuss Europe on Capitol Hill. Geithner reportedly briefed Boehner “on the European debt crisis and the potential impact on America,” according to the Speaker’s spokesman.
The CRS report also found U.S. financial institutions to be on the hook for as much as $641 billion more in exposure to Portugal, Ireland, Italy, Greece, and Spain (PIIGS).
All of which means the $20 billion the nation has already dedicated through the IMF could just be the beginning of a much larger bailout as the crisis worsens in Europe. If widespread defaults occur, the counterparty risk could affect U.S. banks, who will then turn to the Fed, the FDIC and Congress for more bailouts.
“That is why Congress needs to act now, before Americans are put any more on the hook to prop up financial institutions that keep making bad investments,” Wilson concluded.
Robert Romano is the Senior Editor of Americans for Limited Government.