Vitter, Cornyn Press Admin. To Protect American Taxpayers From Foreign Bailouts
(Washington, D.C.) – U.S. Sens. David Vitter and John Cornyn on Thursday sent a letter to Department of the Treasury Secretary Tim Geithner asking the administration for assurances that it will protect American taxpayers from funding foreign bailouts.
“It’s bad enough that taxpayers have to foot the bill for the mistakes of the big banks and the big automakers, but asking them to bail out irresponsible foreign governments is outrageous,” said Vitter. “Our country already owes trillions of dollars in debt. We simply can’t afford to take on other countries’ debt in addition to our own.”
“American taxpayers have seen more bailouts than they can stomach, and the last thing they should have to worry about are their hard-earned tax dollars being used to rescue a foreign government,” said Cornyn.
A provision in the Dodd-Frank Wall Street Act, based on an amendment sponsored by Vitter and Cornyn, shields taxpayer dollars from being used by the IMF to bailout nations who have made irresponsible spending decisions. It requires the Obama administration to evaluate any proposed bailout of a foreign nation where that nation’s public debt exceeds its annual Gross Domestic Product (GDP), and then to certify to Congress whether the bailout loan will be repaid. If the administration cannot certify that the bailout loan will be repaid, it will be required to oppose the bailout and vote against it at the IMF.
The text of the letter follows:
December 2, 2010
Secretary Timothy F. Geithner
U.S. Department of the Treasury
1500 Pennsylvania Ave. NW
Washington D.C. 20220
Dear Secretary Geithner,
We are writing about recent press reports that indicate the Administration is ready to support, among other things, the extension of the European Financial Stability Facility via an extra commitment of money from the International Monetary Fund (IMF). In addition, the European Union and the IMF recently announced an €85 billion bailout for Ireland to shore up its banking sector and meet its debt obligations. This move has intensified speculation that other high-debt European countries will also need IMF assistance in the near future. Although the United States currently has severe debt problems of its own, as the largest financial contributor to the IMF, American taxpayers will likely provide a major share of any IMF financial support.
As you know, the Dodd-Frank Wall Street Act (P.L. 111-203) includes a provision that is based on an amendment we offered during the Senate’s consideration of the Act. The amendment was intended to safeguard taxpayers’ money from being used by the IMF to bail out foreign countries who have made irresponsible spending decisions. The Senate passed the amendment by a vote of 94-0. This provision, included in Section 1501 of P.L. 111-203, requires the Treasury Secretary to direct the United States Executive Director of the International Monetary Fund to evaluate any proposed IMF loan to a country if the amount of the public debt of the country exceeds the gross domestic product of the country and the country is not eligible for assistance from the International Development Association. The Secretary must then determine whether or not the loan will be repaid and certify that determination to Congress. Furthermore, if the Executive Director determines that an IMF loan will not be repaid, the Treasury Secretary is required to direct the Executive Director to vote in opposition to the proposed loan.
It is our expectation that the Administration and the Treasury Department will follow Section 1501 of P.L. 111-203. On this end, we would appreciate assurances from you that the Department will fully comply with Section 1501. In addition, we would like to know what actions you are taking to make sure that any taxpayer money used by the IMF will be repaid back in full. Americans deserve to know that their hard-earned money is protected from bailing out foreign countries who are likely to default on their financial obligations.
Thank you and we look forward to your timely response. If you have any questions, please contact Senator Cornyn’s staff at 202-224-2934 or Senator Vitter’s staff at 202-224-4623.
Sincerely,
JOHN CORNYN DAVID VITTER
U.S. Senator U.S. Senator
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