Is There a $100B IMF Bailout Fund?

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e21’s second favorite morning economics newsletter, Politico’s Morning Money, served as an intermediary between a Treasury bureaucrat and author James Rickards Thursday morning. The topic was whether the Treasury has given the IMF a $100 billion line of credit for Euro bailouts. Rickards gets the best of the interesting exchange, both on the merits and for style points:

RICKARDS VERSUS THE U.S. TREASURY - As promised, here is a slightly condensed version of the entertaining exchange between "Currency Wars" author James G. Rickards and a U.S. Treasury official, filtered through the M.M. mailbox, over whether the IMF has access to $100 billion in U.S. funds it can use for Euro bailouts (or whatever else) that don't require further Congressional approval.

TREASURY TO M.M. - "[T]he [$]100B stuff is wrong. This [should] help your readers understand ...

Q: Can the U.S. give $100 billion to the IMF without Congressional approval?

A: HR 2346 - which was the Supplemental Appropriations Act, 2009, PL 111-32, authorized the U.S. to increase quota contributions to the IMF by about $8 billion and to increase U.S. participation in the New Arrangements to Borrow (NAB) by $100 billion. The U.S. has committed those funds through its increased participation in the New Arrangements to Borrow. There is no additional authority for the U.S. to provide additional loans or quota funds to the IMF, which would require Congressional approval.

RICKARDS: "Wow, I'd be embarrassed to send that. In her own words: "A: HR 2346 ... authorized the U.S. ... to increase U.S. participation in the New Arrangements to Borrow (NAB) by $100 billion..." So she agrees with me that the authority is there. The New Arrangements to Borrow is a line of credit. It's pre-authorized (like your MasterCard) and the IMF can draw it down whenever they like with no further approval.

"She's trying to spin the fact that if the IMF wants MORE than $100 billion they have to go back to Congress (I agree) but she's trying to bury the fact that that the $100 million [TYPO, he meant billion] is a done deal. The missing word in her hypo question (and hence the spin) is 'Q. Can the U.S. give $100 billion more..." We have not been talking about more, we're talking about what's already done in H.R. 2346. ... She can't spin that away. Why would De Mint be trying to rescind something if it's not already there? So, she supports my point but is trying to spin you away. Amazing.

TREASURY: "Wrong. And you're being 'spun' by someone that doesn't know there's a difference between 100B and 100M...now that is embarrassing. He says it's a 'done deal' and requires 'no further approval' - Wrong. In fact, activating the NAB requires TWO approvals: 1. IMF Board (including our exec director that has a 17% share) AND 2. NAB Shareholders (of which we hold 20%, which we specifically negotiated so we had veto power)

RICKARDS : "Well, excuse me for a typo before my second cup of coffee. Mea culpa, mea culpa, mea maxima culpa. When I said, 'no further approvals needed' I referred to the Congress; that's my point. There is approval needed inside the halls of IMF, of course. That's always the case. Any borrower would go to its Board of Directors before sending in a borrowing notice under a committed facility. But Congress is not needed, they are not in the room. So, is she saying Treasury definitely WILL NOT approve a draw down? Thank you! That's actually news, you should headline it. Or, is she saying all options are on the table? My guess is the latter, which means they might use it and WILL use it if circumstances require, which is my only point."