Washington continues to spend U.S. taxpayers’ dollars with reckless abandon, with the IMF’s bailout of Ireland being just the latest example.
After the fact, the International Monetary Fund has conceded it could have done better in predicting Ireland’s property and banking crash that led to last weekend’s announcement of a $113 billion bailout. Nearly $30 billion of that total is being provided by the IMF, of which the USA is the largest contributor with a 17.67% quota. The balance is coming from the European Union.
Ajai Chopra, deputy director of the IMF’s European department, who leads the mission to rescue Ireland, said in an interview with the Financial Times: “we are a learning institution” and “there is no question that we – and other observers – could have done better.” While the comments from Chopra appear candid and forthcoming, they do not instill a lot of confidence in an institution that has the responsibility of doling out US taxpayer money to bail out the European Union.
On November 5, 2010, Treasury Secretary Tim Geithner — with a nod from Federal Reserve Chairman Ben Bernanke — agreed to increase the commitment of the US taxpayer share of bailing out the world’s problems from $60 billion to $133 billion. In total, the total size of the IMF quotas – the contributions of the 187 member states to the fund’s capital – will be doubled from $340 billion to about $756 billion.
I could be wrong, but I don’t think the Treasury wrote a memo to the two million Americans whose unemployment benefits are expiring informing them that their benefits are less important than helping the Irish government shore up its hemorrhaging banking system.
Also on November 5, the IMF’s Executive Board realigned the quota shares to better reflect the changing relative weights of the IMF’s member countries in the global economy, but the US’s 17.67% quota is the largest share and bigger than the BRICs combined. In the most recent realignment, China jumped Germany, France and Britain in the Fund’s rankings, with its quota share rising to 6.19% from 3.65%. India is eighth, Russia is ninth, and Brazil is tenth in terms of their share. Together, the four countries will have 14.18% of IMF quotas.
The $113 billion bailout of Ireland sheds some light on why the IMF expedited the decision to rush through a 122% increase in the size of the fund. Ireland alone accounted for 33% of the total funds previously available.
Now the press is making a big deal about Obama putting in a pay freeze for government employees, citing the projection that it will save $2 billion in 2011. Where was the manic media when the head of the Treasury and Federal Reserve agreed to spend an incremental $73 billion of US taxpayer money on “bailout” money for the IMF?
These savings being made by the administration need to be put into perspective because they pale in comparison to the figures being spent on bailing out other countries. Why is there not more attention being focused on this?
The FT provided a list of banks called the Inter Alpha Group of Banks. They represent everything that went wrong in European banking from 2005 to 2010:
- Commerzbank — Subprime exposure, disastrous acquisition, 2008 blow-up, government capital injection, peripheral exposure
- ING (ING) — Subprime exposure, 2008 blow-up, government capital injection, forced break-up, peripheral exposure.
- Allied Irish Banks (AIB) – too painful to recount
- Banco Espirito Santo — peripheral exposure
- National Bank of Greece — peripheral exposure from hell
- KBC Bank – subprime exposure, 2008 blow up, government capital injection(s)
- Royal Bank of Scotland (RBS) – subprime exposure, disastrous acquisition, 2008 blow-up, government capital injection
- Société Générale — subprime exposure, weird derivatives stuff, weirder staff management
- Santander – Spanish property exposure, peripheral exposure
How does it make you feel that the US taxpayer is providing $133 billion to keep these bankers solvent?
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