By Peter Schroeder and Alexander Bolton - 12/15/11 01:35 AM EST
Global financial leaders met with skeptical GOP lawmakers Wednesday to discuss what role the United States has to play in Europe’s continuing debt crisis.
Rep. Cathy McMorris RodgersCathy McMorris RodgersTransforming VA care: A way forward Dozens of GOP lawmakers staying away from Trump's convention GOP House leaders tout health, poverty solutions MORE (R-Wash.) described her meeting with Lagarde, the first between the two, as respectful, even if neither side changed their mind on the IMF’s — and the United States’ — role in Europe.
Lawmakers said Bernanke offered assurances the Fed would not increase U.S. exposure to the bailout fund European leaders have expanded.
“We’ve had assurance that won’t happen,” said Sen. Jim DeMint (R-S.C.), who offered an amendment to the defense authorization bill instructing the U.S. executive director of the IMF to oppose funding of the European Financial Stability Facility, the bailout fund for stabilizing countries at risk of default. “My impression is the Fed will not do that.”
Republican lawmakers also discussed with Bernanke the Fed’s currency swaps with European central banks to fund business transactions in emerging markets.
“If there was not a risk of the euro going out of existence, it wouldn’t be an issue,” DeMint said. “But if the euro goes out of existence and we’re holding hundreds of billions of dollars of euros, that’s a problem.”
But Sen. Tom CoburnTom CoburnThe Trail 2016: Words matter Ex-Sen. Coburn: I won’t challenge Trump, I’ll vote for him Coburn: I haven't seen 'self-discipline' from Trump MORE (R-Okla.), another critic of IMF intervention in the European debt crisis, said he did not think Bernanke gave any solid assurance that the U.S. would not pour funds into a future rescue.
Coburn said that “a couple of hundred billion dollars” of taxpayer funds could be at risk, counting the exposure of the IMF and the Fed’s liquidity swaps.
Sen. John ThuneJohn ThuneTim Kaine backs call to boost funding for Israeli missile defense FCC chief pushes phone companies to offer free robocall blocking How the new aviation law will affect your travel MORE (R-S.D.), who also attended the meeting, said Bernanke assured GOP lawmakers that he would not increase U.S. exposure to the European crisis but stopped short of blocking the commitment of U.S. funds already at the IMF.
Lagarde requested that her comments in the meeting with the U.S. congresswoman be kept private, according to McMorris Rodgers’s spokesman. The two promised to meet again in the near future to continue the debate.
A spokesman for the IMF said Lagarde “appreciates the opportunity” to consult with government officials in the U.S. and other nations on a regular basis.
The two women have fundamentally different opinions on the best way to help Europe steer through its financial woes.
The IMF has called on European nations to contribute more than 200 billion euros in its effort to help keep the continent afloat, driving concerns from Republicans that the U.S. could be next in line. McMorris Rodgers is leading the charge in Congress to prevent U.S. funds from being used to aid in that effort.
“While America appreciates its responsibilities as the world’s economic leader, a good case can be made that America would best serve our European allies by abstaining from these bailouts because it would help them to enforce the spending and borrowing discipline that both Europe and America need,” McMorris Rodgers said in a statement following the meeting. “With the European debt crisis continuing to dominate the news — and threatening to pull the world into a double-dip recession — I know this is an issue that will continue to grow, and so, I look forward to continuing the dialogue with Madame Lagarde.”
Such a move could put a serious pinch on the IMF, as the U.S. is its largest single contributor. Global leaders, led by the United States, agreed in 2009 to augment the IMF’s funding, contributing $100 billion to beef up its resources.
For its part, the White House has not called for Congress to authorize additional funds to help with Europe’s woes, repeatedly characterizing the problem as a political one, not a financial one. The administration does not see a need to ask Congress to authorize additional funds for the IMF, according to a Treasury official.
“Look, Europe is wealthy enough that there’s no reason why they can’t solve this problem,” President Obama said at a Dec. 8 press conference. “It’s not as if we’re talking about some impoverished country that doesn’t have any resources.”