By Bill Wilson
Today, on March 20, U.S. Treasury Secretary Timothy Geithner will be
testifying the House Financial Services committee on the state of the
international financial system.
This is an opportune moment for members to ask tough questions about
U.S. taxpayers’ role in propping troubled sovereigns in Europe via the
International Monetary Fund (IMF), especially with the Fund’s newly
approved to $36.7 billion of loans to Greece. This will raise taxpayers’
stake in Greece to $13 billion, and Europe as a whole to $20.9
Particularly, in light of recent amendments 22 U.S.C. 286 et seq. in H.R. 4173,
the Dodd-Frank financial legislation, the IMF’s U.S. executive
director Meg Lundsager needed to have developed an evaluation for
lending further resources to Greece. The law requires such an
evaluation take place prior to approval, as Greece’s debt was well in
excess of its GDP, and needed to show the Hellenic nation would not
default on its new loans.
In addition, the law requires the Secretary to “report in writing”
within 30 days of the loan’s approval to your committee “assessing the
likelihood that loans made pursuant to such proposals will be repaid in
This is particularly important because Greece just defaulted on about €105 billion debt ($138 billion) of its €340 billion debt
($447 billion). Of course, not even that saves the Secretary from
having to provide the evaluation to Congress, because Greece’s remaining
€235 billion debt ($309 billion) most certainly still exceeds its GDP, which for 2011 was €215 billion ($283 billion).
So far, it is not known whether this evaluation occurred or not. The
House committee chaired by Rep. Spencer Bachus is charged with ensuring
that the Secretary has complied with the law in full, a thorough
evaluation was prepared prior to the loan’s approval, and that said
analysis is delivered to Congress in a timely fashion.
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