Act now to stop bailout for the IMF, European banks
posted at 12:15 pm on June 11, 2009 by Ed Morrissey
Erick Erickson at RedState has a list of Blue Dog Democrats that have opposed the Obama administration’s $100 billion bailout of the International Monetary Fund, but who are now wavering. Why? According to Erick’s sources, Obama chief of staff Rahm Emanuel has come to Capitol Hill as Monty Hall, playing Let’s Make a Deal to get the IMF bailout passed.
Even if we could afford all of the cash we’ve spent bailing out our own financial institutions, we can’t afford to bail out Europe at the same time. The IMF bailout would do nothing for our own financial strength; in fact, as a breaking report from the Wall Street Journal shows, we’d essentially be funding an attack on the dollar:
Brazil and Russia are set to unload U.S. Treasury bonds as they acquire $10 billion each of new International Monetary Fund securities designed to bolster the institution’s aid programs, officials in the countries said Wednesday.
The moves are part of a bid by the so-called BRIC nations — Brazil, Russia, India and China — to play a bigger role at the IMF and other international institutions. The announcements helped push Treasury yields to their highest level this year on concern that rising U.S. debt has hurt T-bill demand among big holders of U.S. dollar reserves.
Instead of just holding the $100 billion and demonstrating a modicum of fiscal sanity, we would act to strengthen the competition to Treasuries. The US has had to pay out higher yields on these bonds precisely because investors have less confidence in our ability to repay, thanks to wild spending by the Obama administration. Now Brazil and Russia plan to dump Treasuries on the market in favor of IMF securities — and we’re going to make the IMF bonds more attractive by increasing the deficit spending that created the impulse to dump the Treasuries? In what universe does anyone think this is a sane and rational policy?
Let Brazil and Russia bolster the IMF. The Obama administration and the Democrats want to pour gasoline on a wildfire. The spending spree by Obama, Geithner, & Co is out of control, and Congress has to pull the plug. Make the calls today, as the vote will likely come tonight.
Update: According to this post at Firedoglake — which opposes the entire thing — the White House and Democratic leadership have attached the “Cash for Clunkers” proposal as an amendment to sweeten the pot. Thyey’re pegging the cost of the Clunker Program at $4 billion, but that would fund 1 million trade-ins — not the 25 million Democrats estimated would be eligible. Even the Detroit Free Press questions the wisdom of this program:
The price tag on the House-passed bill is pegged at $4 billion — and that’s on top of the billions already propping up Detroit’s bankrupt pair and a number of industry suppliers. Plus, the legislation doesn’t specify that your new vehicle has to come from a U.S. company or even an American factory.
I suspect a lot of people will do the math and decide this is a deal they can’t afford. Here’s why: If your old car or truck gets less than 18 m.p.g., you can qualify for a voucher of $3,500-$4,500 toward a new one, but the old one has to go the shredder. (The idea, after all, is to get ’em off the road.)
So the credit is all you get, no trade-in value. (You might be better off with a conventional trade-in.) Even with the credit, you’re going to spend $10,000-$15,000 or more for new wheels. Now, if you’ve been driving an older vehicle because you can’t afford a new one or aren’t sure you’ll have a job next month, are you really ready to take on a car payment? Can you even get credit?
If you’re buying a new car, it has to get at least 22 m.p.g. If it’s a new truck or SUV — which most of these will be since few cars get less than 22 m.p.g. — you only have to buy something that gets 2 m.p.g. better to qualify for the credit. But even at $3 a gallon, will the savings in gasoline be enough for you to manage a car payment?
The entire idea is ludicrous, as I explained yesterday; it reduces the current value of autos to $0, an asset drain that many Americans won’t appreciate at all. It also spends money that the government doesn’t have to fund car purchases most Americans can’t afford and entices them to extend their liabilities when excessive credit is one of the problems at the root of the financial collapse. If that’s supposed to sweeten the pot, it just demonstrates the lack of critical thinking at the White House.