IMF lending habits get a little tighter
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Kai Ryssdal: The Senate has a key vote on financial reform scheduled for tomorrow. Senators are of course busy tacking on a stack of last-minute amendments to that bill. And one of them, in particular, got our attention about the International Monetary Fund. The IMF’s been in the news lately for its role in that trillion-dollar European bailout package. The IMF ponied up a big chunk of that total. But senators want it to stop lending to countries that can’t pay the money back.
Marketplace’s Stacey Vanek-Smith reports.
Stacey Vanek-Smith: The amendment would block the IMF from lending money to a country that probably couldn’t pay it back — namely, countries like Greece and Italy, whose debts exceed their annual incomes.
Republican Senator John Cornyn of Texas proposed the amendment. It passed unanimously.
Senator John Cornyn: The American people are suffering from bailout fatigue. It’s one thing to do that for institutions here at home to keep our economy from tanking. They were not willing to do it for other countries.
The IMF is funded by member countries. The U.S. puts up about 17 percent of the money. Raghu Rajan is a former chief economist at the IMF.
Raghu Rajan: Greece is a small country, and if Greece is too big to fail, than everybody, except perhaps poor Iceland, is too big to fail. At some point, we have to draw a line in the sand.
Rajan says countries like Greece need to restructure their debt and tackle their fundamental problems, not borrow billions more they can’t repay. But Kenneth Rogoff, also former chief economist at the IMF, disagrees.
Kenneth Rogoff: Europe is in trouble. This is not the time for the United States to be sending a signal, “we’re not going to help.”
Rogoff says countries need the money for day-to-day operations while they figure out a long-term solution.
I’m Stacey Vanek-Smith for Marketplace.
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