Dec. 8, 2011, Fairfax, VA—Americans for Limited Government President Bill Wilson today urged Treasury Secretary Timothy Geithner to clarify to taxpayers that the U.S. will have no role in bailing out Europe.
Wilson’s letter came in response to Geithner’s denial that the Federal Reserve is bailing out Europe. At a recent press conference with German Finance Minister Wolfgang Schaeuble, Geithner told reporters that “I would say the reports I’ve read in the press about what the Fed can do are not accurate.”
Wilson is not convinced, writing in his letter, “Recall that it took Freedom of Information Act requests being enforced by federal courts and an audit ordered by Congress to reveal trillions of dollars of emergency loans given to foreign banks by the Federal Reserve during the financial crisis, and also $442.7 billion given directly to purchase agency-issued mortgage-backed securities.”
Wilson asked Geithner for verification, “How are taxpayers to know if you are telling the truth? How can they even verify what role the Fed may be currently playing in Europe?”
The recipients of emergency loans are not typically published by the central bank without an audit or some other form of outside intervention.
The letter also inquired if there were any plans at the IMF to boost its lending capacity by borrowing the money elsewhere, if not from the Federal Reserve. Wilson cited Article VII of the IMF’s Articles of Agreement that stipulates the Fund can only borrow money “to replenish its holdings on any member’s currency.”
Wilson wrote, “[The IMF] cannot borrow money in order to boost its own lending capacity. The only way to do that would be to expand the IMF’s quotas, which requires congressional consent in the U.S.”
The U.S. funds 17.72 percent of the IMF, and Wilson warned that should the IMF borrow money to boost its lending capacity, and the European debts were to default anyway, then U.S. taxpayers would still be on the hook for the losses.
Legislation by Rep. Cathy McMorris Rodgers, HR 2313, would rescind whatever remains of the nation’s $100 billion line of credit to the IMF. It already has 58 cosponsors, whom Wilson praised as “heroes” on behalf of taxpayers.
Wilson concluded by imploring Geithner to reject any American involvement with a bailout of European banks that bet poorly on sovereign debt, writing, “It is your duty to categorically state that U.S. taxpayers will not back up or cover any European bailout through the IMF, whether through an increase of its quotas or by borrowing the funds through a house of cards scheme.”
Attachments:
ALG President Bill Wilson’s Letter to U.S. Treasury Timothy Geithner, Dec. 8, 2011 at www.getliberty.org/files/LetterIMFTreasuryFed 12-8-11.pdf.
Article VII of IMF Articles of Agreement at http://www.imf.org/external/pubs/ft/aa/index.htm#art7.
Interview Availability: Please contact Rebekah Rast at (703) 383-0880 or at rrast@getliberty.org to arrange an interview with ALG President Bill Wilson.