U.S. Bailout of European Dollars
- Issue: Potential U.S. Bailout of European Banks: Should Congress pass legislation prohibiting the Obama administration, the Fed, and the Treasury Department from making a U.S. taxpayer-funded contribution to stabilize/bailout Europe through the International Monetary Fund (IMF)?
Posted on 12/5/11 by Sandra
- eVoiceAmerica Issue Summary: President Obama has told European leaders that theUS will “do its part” to avert the failure of the Euro (by a bailout funded by US taxpayers). The Fed and the President have acted to this end without informing the American people, without debate in or consulting Congress, or public discourse on the short- and long-term risks, the amount, and the effects on the American and European economies by Fed manipulations of the dollar vs. the Euro.
- Whether a US taxpayer bailout will solve Europe’s solvency problem:
According to the NewAmerican.com on 12/1/11: “’We should be under no illusion about today’s action by the Federal Reserve,’ said Rep. Dan Burton (R-Ind.) in a statement. ‘The Federal Reserve’s decision to allow European banks to borrow American dollars cheaply, combined with the Administration’s action earlier in the week to double the United States financial contribution to the International Monetary fund is nothing more or less than a U.S. taxpayer bailout of Europe.’
“Rep. Burton said that even though markets may have reacted positively to the newest bailout announcement, the long-term consequences will be devastating. ‘This boondoggle will only serve to further devalue our currency, increase inflation pressures, worsen our ability to rebound from the likely failure of the Euro, and make it that much harder to solve America’s own crushing financial problems,’ he noted.
“’Like the American government,’ Burtonsaid, ‘European authorities do not have a revenue problem, they have a spending problem. And throwing American taxpayer money at the crisis will not solve the problem anymore than President Obama’s failed “stimulus” plan solved America’s woes,’ he concluded.
“The coordinated central-bank easing policy, of course, will cause a depreciation in the value of all existing money. And it won’t even come close to solving the underlying problems, according to analysts.
“Thomas Eddlem in a piece for The New American. ‘Yes, markets received a sense of security from the central banks’ action. But it is a false sense of security before the looming debt crisis breaks.’
“The new coordinated central bank policy is not the first time Americans have been forced to bail out European recent years. The Fed has been exposed secretly pumping trillions of dollars into European banks throughout the crisis.
And as the largest single contingent of contributors, U.S. taxpayers have long been partially financing all of the so-called “rescue” packages floated by the IMF. Lawmakers were furious back then, too.
“’The bailout of Greece set a dangerous precedent of using American tax dollars for other European bailouts,’ complained Rep. Mike Pence (R-Ind.) in a statement late last year. ‘Now Americans are waking up to the harsh reality that they may be on the hook to keep the Euro afloat as well.’”
According the The Hill Magazine on 12/2/11: “Conservatives say they will try to block the International Monetary Fund from bailing out Italy and Spain, which they say could leave U.S. taxpayers with a huge bill.
“Republicans on both sides of the Capitol complain that the Obama administration has refused to share details of what Treasury Secretary Timothy Geithner is discussing with European leaders amid reports the IMF could intervene.
“Sen. Tom Coburn (R-Okla.) says he is planning legislation directing theU.S.government to veto an expanded role for the fund.
“Senate Republican Steering Committee Chairman Jim DeMint (R-S.C.) and Rep. Cathy McMorris Rodgers (Wash.), a member of the House Republican leadership, also have legislation to curb the proposed intervention.
“’I’m adamantly against the IMF being involved in this,’ Coburn said.
“’We’re throwing good money after bad down a hole that I think is not a solvable problem,’ he said.
“’Europeis going to default eventually, so why would you socialize their profligate spending,’ he added.
“Coburn estimates theU.S.could be liable for as much as $176 billion if the IMF shores upItalyandSpainand the European Union collapses.
“President Obama this week said the U.S. ‘stands ready to do our part’ to help resolve the crisis, and Geithner in October said using U.S. tax dollars through the IMF to shore up Europe’s efforts was appropriate.
“DeMint offered an amendment to the defense authorization bill instructing the U.S. executive director of the IMF to use the voice and vote of the United States to oppose funding of the European Financial Stability Facility, the bailout fund that would be used to stabilize countries at risk of default.
“’We need some transparency about what’s really going on,’ said McMorris Rodgers. ‘It’s hard to get information. We’re talking aboutU.S.taxpayer dollars being involved in the European bailout. The administration needs to be honest with the Congress. I believe Congress needs to be involved in making this decision.’
“But Coburn and other Republicans are skeptical their effort will be successful. They expect Senate Majority Leader Harry Reid (D-Nev.) to prevent the Senate from voting on legislation to blockU.S.funds from being used in an IMF bailout.
“Even if it passes Congress, Coburn says President Obama would likely veto the legislation.”
According the Curious Capitalist on 11/30/11: The bottom-line truth about today’s Federal Reserve-led coordinated effort by six of the developed worlds’ central banks to ease the liquidity problems of European financial institutions is this: It doesn’t change anything. European leaders still have the same tough decision to make. Either impose even stricter austerity measures on Europe’s struggling nations or force Germany and other stronger European nations to come forward with an even bigger bailout, or, of course, kiss the Euro good-bye.
Another wrinkle: If the move leads to an even bigger bailout the result could be a new round of inflation, particularly in the emerging market countries. That would lead to more rate hikes inChina and elsewhere, which could slow the entire global economy.
To write your opinion on this issue to your elected reps in Washington using eVoiceAmerica.com, click here Potential U.S. Bailout of European Insolvency