Washington, D.C. – Rep. Cathy McMorris Rodgers (R-WA), Vice Chair of the House Republican Conference, sent a letter to Treasury Secretary Timothy Geithner yesterday expressing concern about the Administration’s policies toward the International Monetary Fund (IMF), and America’s growing involvement through the IMF in the European bailouts.
In her letter, Rep. McMorris Rodgers warns Secretary Geithner that federal law requires that any decision on his part to use the $100 billion line of credit to the IMF (known as the “New Arrangements to Borrow”) to fulfill the Administration’s commitment to double America’s quota at the IMF must first be approved by Congress. Secretary Geithner made this commitment to the IMF in 2010, and pledged to fulfill it by September 2012.
This is the latest in the Congresswoman’s efforts to stop U.S. participation in the European bailouts, which has taken on a new sense of urgency as the NAB continues to be used for that purpose. She is the author of HR 2313, which would rescind any unused portion of the NAB and earmark it for deficit reduction. The bill has 92 cosponsors.
The text of the letter is below. To learn more about the Congresswoman’s efforts, click here.
March 6, 2012
The Honorable Timothy F. Geithner
United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Secretary Geithner:
I am writing as a follow up to the G-20 meeting held two weeks ago and the statements made by IMF Managing Director Christine LaGarde regarding the IMF’s future lending capacity. Director LaGarde emphasized the continued fragility of the European economy and reiterated the need to increase the IMF’s lending capacity by $500 billion. Specifically, she encouraged IMF members to ratify the quota reforms approved in 2010 by members of the G-20, including the United States, which in the case of the United States would result in a doubling of our quota contribution from $65 billion to $130 billion.
There are many issues related to the United States’ participation in the IMF’s lending arrangements that give me cause for concern, not the least of which includes increasing the United States’ quota contribution. 22 U.S.C. 286(c) of the Bretton Woods Agreement Act makes clear that any quota increase must first be approved by Congress. This approval includes any attempt to shift or reclassify current lending resources, such as the $100 billion new arrangements to borrow (NAB) program expanded in 2009, in order to meet the United States’ new obligation.
As the IMF’s largest contributor, the United States has an obligation to ensure that the lending arrangements involving the United States reflect the appropriate risk involved in the transaction. Each new report raises questions about the United States’ role, including what is the United States exposure, in each of these lending packages? Take for example Greece. At the time of the first IMF loan arrangement to Greece, its debt to GDP ratio was 113 percent. Today, it’s 159 percent. The recent downgrade of Greece’s status to default and the uncertain support to the reforms agreed to last December by members of the EU, as recently announced by Ireland, are reminders of the risk that is inherent in the IMF’s lending arrangements, particularly among vulnerable members of the European Union
As most world leaders now recognize, implementing excessive borrowing and spending policies don’t work. Nor do bailouts. I worry that the size of the IMF’s loans and the difficulty of ensuring adequate reform among countries participating in the IMF’s lending arrangements only increases the risk of default. I believe it is only prudent that before the United States commit to any additional IMF contributions, including through the NAB, that the Treasury Department publically reassure Congress and the American people that it will abide by federal law and not use the NAB to double our IMF quota.
I look forward to receiving a more complete explanation of the Administration’s policy at the IMF to date, including specific contributions made from our quota and the NAB, and where you see the policy moving forward.
Rep. Cathy McMorris Rodgers