The costs to US taxpayers for bailing out the week Euro nations will only be $100 billion, a bit less than the price tag for salvaging GM, Bank of America Corporation (NYSE: BAC), and Citigroup (NYSE: C). Unfortunately, the American Treasury will have no chance of being paid back by the IMF as it has been by the banks and may be by GM.
Congresswoman Cathy McMorris Rogers, a Republican, reacted in horror to comments by the International Monetary Fund that the US will have to put a huge new contribution into the IMF to support the continent’s rehabilitation.In a press release from Rogers entitled “Obama Administration Needs To Stand Up For US Taxpayers, she said:
On Friday, June 4, the chairman of the IMF’s policy committee, Youssef Boutros-Ghali, said the IMF’s financial reserves would have to rise “very significantly” in the wake of the IMF’s $335 billion commitment to bailout Greece and the European Union. “If we are going to start including funds made available to Europe, then the IMF is not properly resourced,” said Mr. Boutros-Ghali, while adding that IMF members were talking of doubling the amount of Special Drawing Rights (SDRs). In 2009, the IMF increased its SDR allocation from $34 billion to $318 billion. To help facilitate this process, the U.S. Congress – over the objection of most House Republicans – increased America’s commitment to the IMF by $100 billion. If the SDR allocation needs to be doubled – as Mr. Boutros-Ghali claims – that would mean U.S. taxpayers would probably be on the hook for an additional $100 billion, if not more.
Rep. Rogers is no economist. A double-dip recession in Europe would cost US exporters dearly. A slowdown in exports from America could undermine GDP growth and harm the chances of improving employment rates.
American taxpayers will ask whether a $100 billion investment in the Eurozone’s finances is worth increase in the US deficit and national debt which will almost certainly have to be made up for via taxes. The solution may be that Americans have to stop buying European cars and in their place buy cars from GM. As the No. 1 car company in America goes public, the yield from that IPO should cover the lion’s share of the US contribution to the IMF.
Douglas A. McIntyre
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