By: Richard A. Correa Sr. SGT RIARNG, Retired
As the TEA Parties have called for the federal government to return to fiscal responsibility there is one aspect of this that has received little attention, funding for the IMF and World Bank. Of course it is implied that this area of the federal budget must be reformed along with all other aspects of federal spending, but most of the public is unaware of what is really happening in this slice of the US budget. And, as seems to be the case wherever we scrutinize our governments’ largesse, it is far worse than anyone realizes.
While the TEA Parties, the 9/12ers and the rest of us highlight our opposition to TARP and the bank bailouts most are completely unaware that the American taxpayer has been on the hook for the bad loans made by international bankers and financiers. Nor do they know that they have been bailing out these bankers since the inception of the World Bank and the International Monetary Fund, which were created shortly after World War II.
Few know that these banks, like the US Federal Reserve bank, the Bank of England etc., are owned by private investors, and have made these investors rich beyond imagination. Nor do most of us know that these investors have their investments protected by the wealthy nations of the world, led by the United States, which have pledged to make good on any loans that go into default. Because of this pledge the US taxpayer has paid these bankers and their investors hundreds of billions of dollars to keep the pledge made by the politicians that were in office at the time the pledge was made.
The most recent episode of this scam was in the form of legislation that was before the US Congress, HR 1302, called the ‘Global Poverty Act of 2007’, an 845 billion dollar looting of the federal treasury and another millstone on the necks of working Americans. Conceived to support the United Nations Millennium Development Goals, it was nothing more than a bailout of bankers that made bad loans to third world dictators and the text of the bill states this clearly.
The bill, introduced in the US House of Representatives on March 1, 2007, and, according to govtrack.us, was passed by voice vote on September 26, 2007. No record of the positions of the representatives was kept. The bill was cosponsored by 84 members of the House of Representatives, including 5 republicans. It was supported by President George W. Bush as a part of his commitment to the G-8 nations in response to the UNs Millennium Development Goals.
HR 1302, Sec 2 Findings, paragraph (8) states:
“At the summit of the Group of Eight (G-8) nations in July 2005, leaders from all eight countries committed to increase aid to Africa from the current $25 billion annually to $50 billion by 2010, and to cancel 100 percent of the debt obligations owed to the World Bank, African Development Bank, and International Monetary Fund by 18 of the world’s poorest nations.”
The good news is that this bill was not passed by the US Senate so it has not become law, yet. As govtrack.us points out ‘Members often reintroduce bills that did not come up for debate under a new number in the next session’. So will this bill be reintroduced in the congress? Perhaps a look at the sponsor and cosponsors of the senate version of the bill and a little history may shed some light on this.
The senate version of the bill, S 2433, was sponsored by Barack Obama. The cosponsors were:
Joseph Biden [D-DE]
Jeff Bingaman [D-NM]
Barbara Boxer [D-CA]
Sherrod Brown [D-OH]
Maria Cantwell [D-WA]
Benjamin Cardin [D-MD]
Robert Casey [D-PA]
Hillary Clinton [D-NY]
Susan Collins [R-ME]
Christopher Dodd [D-CT]
Richard Durbin [D-IL]
Russell Feingold [D-WI]
Dianne Feinstein [D-CA]
Charles Hagel [R-NE]
Thomas Harkin [D-IA]
Tim Johnson [D-SD]
John Kerry [D-MA]
Based on this list of elite’s it’s a good bet this beast will be resurrected.
At this point it should be noted that the Congressional Research Office has released a report titled “The Global Financial Crisis: Increasing IMFResources and the Role of Congress” which states in its summary page and again in the table on page 11 that President Obama has committed the United States to allow the IMF to ‘borrow’ 100 billion dollars. As loans to the IMF are never paid back we should consider this a ‘grant’ of 100 billion dollars. That is in addition to our annual commitment to the IMF, originally 8.8 billion dollars.
The following examples of how the IMF and World Bank, as well as reckless US banks, are supported by the US taxpayer are extracted from “The Creature from Jekyll Island” by G. Edward Griffin.
Brazil became a major player in 1982 when it announced that it too was unable to make payments on its debt. In response, the U. S. Treasury made a direct loan of $1.23 billion to keep those checks going to the banks while negotiations were under way for a more permanent solution through the IMF. Twenty days later, it gave another $1.5 billion; the bank of International Settlements advanced $1.2 billion. The following month, the IMF provided $5.5 billion; Western banks extended $10 billion in trade credits; old loans were rescheduled; and $4.4 billion in new loans were made by a Morgan Bank syndication. The “temporary” loans from the U.S. Treasury were extended with no repayment date established. Ron Chernow comments:
“The plan set a fateful precedent of ‘curing’ the debt crisis by heaping on more debt. In this charade, bankers would lend more to Brazil with one hand, then take it back with the other. This preserved the fictitious book value of loans on bank balance sheets. Approaching the rescue as a grand syndication, the bankers piled on high interest rates and rescheduling fees.”1
By 1983, The Third World governments owed $300 billion to banks and $400 billion to the industrialized governments. Twenty-five nations were already behind in their payments. Brazil was in default a second time and asked for rescheduling, as did Rumania, Cuba, and Zambia. The IMF stepped in and made additional billions of dollars available to the delinquent countries. The Department of Agriculture, through the Commodity Credit Corporation, paid $431 million to American banks to cover payments on loans from Brazil, Morocco, Peru, and Rumania. At the conclusion of these arrangements, the April 20, 1983, Wall Street Journal editorialized that “the international debt crisis … is, for all practical purposes, over.”
Not quite. By 1987, Brazil was again in default on its monstrous $121 billion debt, this time for one and a-half years. In spite of the torrent of money that had passed through its hands, it was now so broke, it couldn’t even buy gasoline for its police cars. In 1989, as a new round of bailout was being organized, President Bush (CFR) announced that the only real solution to the Third-World debt problem was debt forgiveness.
By 1982, Argentina was unable to make a $2.3 billion payment that was due in July and August. The banks extended their loans while the IMF prepared a new infusion in the amount of $2.15 billion. This restored the interest payments and gave the Argentinean politicians a little extra spending money. Seven months later, Argentina announced it could not make any more payments until the fall of 1983. The banks immediately began negotiations for rollovers, guarantees, and new IMF loans.
Argentina then signed an agreement with 350 creditor banks to stretch out payments on nearly a fourth of its $13.4 billion debt, and the banks agreed to lend an extra $4.2 billion to cover interest payments and political incentives. The IMF gave $1.7 billion. The United States government gave an additional $500 million directly. Argentina then paid $850 million in overdue interest charges to the banks.
By 1988, Argentina had again stopped payment on its loans and was falling hopelessly behind as bankers and politicians went into a huddle to call the next bailout plat. Somehow, the payments had to be passed on one more time to the taxpayers-which they were in the form of new loans, rollovers, and guarantees. As summarized by Larry A. Sjaastad at the University of Chicago:
“There isn’t a US bank that would not sell its entire Latin American portfolio for 40 cents on the dollar were it not for the possibility that skillful political lobbying might turn up a sucker willing to pay 50 or 60 or even 90 cents on the dollar. And that sucker is the US Taxpayer.”2
An unbiased assessment of this reveals it to be just another scam to transfer wealth from the American people to others, in this case the tinhorn dictators and crooked politicians of other countries. To get a better understanding of how the scam works and the mechanism put in place to make it possible read ‘The Creature from Jekyll Island’, it will be a revelation.
While most people understand the absurdity of trying to solve any nation’s debt problem with more loans with more fees and higher interest rates, for the international bankers and financiers it couldn’t be sweeter. Make a loan, extort interest rates out of the borrower you know are going to send them into default, and when it happens the US Taxpayer pays you back the loan principle and some of the interest the borrower can no longer pay.
Can you envision how low your tax bill would be and how much better off your family would be if we just stopped allowing this to happen. Couldn’t you put this money to better use by putting it in your children’s college fund, taking the vacation you’ve had to put off because it is too expensive, or the home improvements you’ve been trying to save for?
With the federal government now generating trillion dollar deficits would it not be prudent to stop these policies and apply the savings against our debt?
Of course the politicians will say that these institutions are too big to fail.
So what, they’re the ones that made the bad loans, not us.
So what do we want? We want an immediate end to this looting of the federal treasury.
1 Chernow, p. 644
2 “Another Plan to Mop Up the Mess,” Insight, April 10, 1989, p. 31