Sunday, June 07, 2009

Bailing Out the World Ma

President Barack Obama's plan to give an extra $108bn to the International Monetary Fund was in danger of falling apart yesterday as Republican lawmakers opposed the extra funding and Democrat leaders scrambled to win enough votes without them.

Mr Obama has called for member countries to beef up the IMF to help it combat the global downturn. At April's G20 meeting he promised to increase the US contribution and secured similar promises from others. But he has run into problems in a Congress weary of bail-outs and concerned about the swelling budget deficit.

Ah, transparency. Perhaps you've read that the new era of candor in government spending has arrived. Except, apparently, when it comes to the $750 billion that the Obama Administration and other nations have agreed to provide the International Monetary Fund. In this case, it's all opacity all the time.

At the G-20 meeting in April, the world's big shots promised to provide $500 billion under credit lines to the IMF known as "new arrangements to borrow." The U.S. share was said to be $100 billion, which last week we learned is actually $108 billion. The Obama Administration is now asking Congress to appropriate the cash, except that the Congressional Budget Office is only scoring the cost at $5 billion. How so? Because the transaction is being called an "exchange of assets," which means the U.S. gives the IMF the $108 billion and the IMF gives the U.S. a promissory note. Which raises a question: If it costs so little, why not make it $200 billion. Or a trillion? It's free!

IMF History: The IMF has played a part in shaping the global economy since the end of World War II.

---- And a fine shape the global economy is in, heh?

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