By Robert Romano — Despite recent deals totaling tens of billions of euros from the International Monetary Fund (IMF), European Central Bank (ECB), and the European Financial Stability Facility (EFSF) to prop up the banks that bet poorly on Greek debt, IMF director Christine Lagarde is coming hat in hand to American taxpayers for more money.
The IMF has recently approved about $36.7 billion of additional loans to Greece. This will raise taxpayers’ stake in Greece to $13 billion, and Europe as a whole to $20.9 billion.
And now Lagarde wants the U.S. to double its quota subscription to nearly $130 billion. The increased quota would replace $65 billion of part of the nation’s current $100 billion line of credit to the IMF created in 2009 by the Pelosi-Reid Congress, keeping the nation’s total stake in the IMF at $165 billion.
The difference is that whereas the credit line can be tapped when needed, the quota moneys are given to the IMF up front and irredeemably.
Said Lagarde, “We can provide a circle of protection against global turbulence, and help members adjust to changing circumstances with minimal disruption. But to do this effectively in today’s world, we need more resources.”
The IMF’s pleas for more taxpayer money come at a time when Greece has already defaulted on about €105 billion debt ($138 billion) of its €340 billion debt ($447 billion). Even with the relatively smaller liability to financial institutions, Greece’s remaining €235 billion debt ($309 billion) most certainly still exceeds its GDP, which for 2011 was €215 billion ($283 billion).
All of which makes further bailouts for Greece and other troubled European sovereigns a very bad investment for taxpayers.
Even the IMF had to admit that the risks of the new Greek loan program were “exceptionally high”. It even admitted that further restructuring — which would be a technical default — by Athens may be necessary to get its fiscal house back in order.
How do we know the White House gave its blessing? Because it requires 85 percent of the IMF’s executive board to approve any increase of quotas, and the U.S. has 16.75 percent of the vote, such a move could not have occurred — not without U.S. support.
Yet, the Obama Administration has yet to place a formal request with Congress for doubling the quota. Treasury Secretary Timothy Geithner had the audacity to tell lawmakers last month that “we have no intention to seek additional U.S. resources for the IMF.”
Then, why did the U.S. representative vote at the IMF to do just that?
It would appear that the White House is promising one thing to Europe, and singing a different election year tune to taxpayers.
Much like Obama’s need for “flexibility” until after the election to discuss missile defense with the Russians, Geithner wants to tamp down political criticism of European bailouts, while assuring Europe that the money is on the way — with a wink and nod.
Robert Romano is the Senior Editor of Americans for Limited Government.