When California Democratic Rep. Nancy Pelosi was the Speaker of the House in 2009, President Barack Obama and congressional Democrats authorized $100 billion in spending as a line of credit for the International Monetary Fund to be used in times of emergency — funds that could now be used to bail out European banks.
As the Eurozone takes a turn for the worse and chatter heats up about more European Union and IMF bailouts across the continent, Republicans in Congress are pushing to rescind the $100 billion set-aside.
That $100 billion is an addition to the $64.4 billion the U.S. Treasury will provide in quotas to the IMF this year. That new funding has not been formally appropriated, but the IMF could request the money whenever it pleases.
Washington Republican Rep. Cathy McMorris Rodgers, who has led the fight in Congress against providing a European bailout with U.S. taxpayer cash, told The Daily Caller that this $100 billion line of credit received some attention — but not nearly enough — when it was created in 2009.
“It was attached to another bill and it was part of funding for defense,” McMorris Rodgers told The Daily Caller in a phone interview. “There were some concerns raised at the time, and every single Republican had voted against this authorization of an additional $100 billion for the line of credit.”
“They call it the ‘New Arrangements to Borrow’ and [Treasury Secretary] Timothy Geithner, I really think, downplayed it and said ‘it’s just available, just in case, we really don’t have any plans for it,’” she added.
“I very much suspect that the administration did not want a big debate over this issue because it’s hard for them to defend using taxpayer dollars to bail out the European Union.”
McMorris Rodgers is leading the charge, with more than 80 House Republicans, to rescind that line of credit before the IMF takes any more of it. She told TheDC that IMF officials confirmed to her that about $6 billion of the $100 billion has been used to help bail out Portugal, as well as St. Kitts and Nevis, a small Caribbean country.
Geithner, she said, has broken the usual protocol by failing to send reports to Congress about where that $6 billion was spent. Congress expects a semi-annual update on the funding, including what has been spent, and where. McMorris Rodgers said that in three years, Geithner has never sent Congress a report on the matter.
Europe has fallen into dire financial straits as of late. Just last week, the continent saw several of its countries hit with credit downgrades. Though Greece has received the most attention, McMorris Rodgers warns that Greece is just the beginning of what could be a larger and more out-of-control downward European spiral.
“I think it’s important to recognize that Greece — all the eyes have been on Greece — Greece is a relatively small country,” she said. “You’re talking two percent of the European Union, 11 million people, and yet there’s already been over $300 billion in bailout funds made available to Greece through the European Union and the IMF. That’s more than their entire GDP.
“So, if they [the EU and the IMF] were to continue down that trend, the amount of money we could be talking about is just off the charts.”
As vice chair of the House Republican Caucus, McMorris Rodgers is the highest-ranking Republican woman in Congress. She has sponsored a bill that would rescind the extra bailout funds and use them for deficit reduction. South Carolina Republican Sen. Jim DeMint has already gathered more than 20 co-sponsors for the Senate’s version of the legislation.
The U.S. Treasury ordinarily has about $65 billion set aside for international banking emergencies, an IMF credit line that’s already been tapped. Without any approval from Congress, Geithner promised the IMF in an official statement that he plans to double that $65 billion quota.
“Our current quota is about $65 billion and now, so, that raises the question: ‘How are you going to pay for that [doubled quota], Mr. Secretary?’” McMorris Rodgers said.
“Some are thinking he’s going to use the line of credit [the $100 billion fund]. We don’t believe that he has the legislative authority to make that decision: Those are two different pots of money, and the line of credit has a lot more restrictions on how that can be used than the quota.”
McMorris Rodgers noted that since her bill would cut about $100 billion in spending, it’s one way House Republicans could fulfill their “Pledge to America” — a promise to cut that same amount of money from federal spending plans. As a member of House GOP leadership, she could use her leverage in the caucus to make that happen.
Americans for Limited Government communications director Rick Manning told TheDC that the bill would kill two birds with one stone.
“The McMorris Rodgers legislation allows House Republicans to fulfill two pledges that they made in 2010, to cut $100 billion of federal government liabilities and to not allow another bailout of ‘too big to fail’ institutions to occur again,” Manning said in an email.
McMorris Rodgers believes that if Obama and Democratic Senate Majority Leader Harry Reid don’t support her efforts to rescind that $100 billion, they will have to explain to Americans why taxpayer money is bailing out other countries’ failing banks.
It’s unclear where House Speaker John Boehner or Majority Leader Eric Cantor stand on this issue. Their spokespersons did not return TheDC’s requests for comment.