US "Pours Cold Water" On IMF Expansion Plans, Leaves European Bailout To Europeans

Tyler Durden's picture

It is probably not too surprising that the negative news of the day, namely that the US has decided against expanding the IMF and thus leaving the European bailout to the Europeans (at least for now), was released quietly long after happy hour started on Friday. Yet that is precisely what happened after Reuters dropped a Friday night bomb that with hours before a communique is issued by the G20 in Paris, contrary to previous rumors and representation "U.S. Treasury Secretary Timothy Geithner and his Canadian and Australian counterparts poured cold water on the idea" of injecting $350 billion into the International Monetary Fund. As a reminder, the IMF expansion myth was one of the latest rumors floated today by none other than the tag team of Geithner and Liesman. It lasted less than24 hours but it served its purpose. The full on media onslaught of never ending lies has never been more acute, more relentless, and more blatant: with every central bank and trade surplussed nation all in, the very nature of the global ponzi is at risk.

From Reuters:

They (the IMF) have very substantial resources that are uncommitted," Geithner said.

 

German Finance Minister Wolfgang Schaeuble agreed the euro zone debt crisis was for Europe to solve, and expressed confidence that EU leaders would produce a plan at the October 23 summit that would be convincing for financial markets.

 

The United States is among countries keen to keep pressure on the Europeans to act more decisively to end the two-year-old debt crisis that began in Greece but has since spread to Ireland and Portugal and is lapping at Spain and Italy.

 

"The first priority here is for Europeans to put their own house in order," Australian Finance Minister Wayne Swan said.

The second priority is to get the world's solvent countries' future so deeply intertwined with that of the bankrupt ones, that letting Greece, and hence France, would result in a Global Assured Destruction.

G20 sources said most BRICS economies were in favor of bolstering the IMF's capital as a crisis-fighting tool.

 

"We have said this before and have conveyed this again, that if emerging economies and the BRICS are called upon to contribute, we can do it via the International Monetary Fund," one of the sources said. "India is open to it, China and Brazil are also okay with the idea."

The same China which on Monday had to bail out its banking sector, is somehow expected to provide billions to plus briefly an infinitely large European liquidity hole. But those billions are nowhere near as much as what the US taxpayer will have to shovel into the European money pit once Geithner's "cold water" announcement ends up steaming for a few days in a bidless stock market.

And while discussions over what form if any the expanded EFSF will take (a moot point as if a E440 billion expansion took Europe 3 months to ratify, a E3.5 billion version will certainly not be done before 2015) what seems to be increasingly under question is if the conditions of even the second Greek bailout will be satisfied.

The Franco-German crisis plan is likely to ask banks to accept bigger losses on their Greek debt than the 21 percent spelled out in a July plan for a second bailout of Athens, which now looks insufficient.

 

"It will be more, that's more or less certain," French Finance Minister Francois Baroin said.

Well...no, because the FT informs us that according to Greece itself any haircuts over 21% are out of the question:

The lead negotiator for private holders of Greek debt has said that investors are unwilling to accept greater losses on their bonds than the 21 per cent agreed in July, jeopardising eurozone plans to finalise a second Greek bail-out by the end of next week.

 

Charles Dallara, managing director of the Institute of International Finance, criticised European leaders on Friday for failing to allow the July deal to proceed. He said any greater losses imposed on Greek bondholders could prompt investors to sell the sovereign debt of other eurozone countries, destabilising the single currency.

 

We do not see that a compelling case has been made to reopen the deal,” Mr Dallara told the FT. “A deal is a deal.”

 

Securing a voluntary “haircut” from Greek bondholders has been the centrepiece of the second €109bn ($150bn) Greek bail-out after a German-led group of creditor countries demanded private investors bear more of the rescue burden so eurozone taxpayers would not be saddled with the entire bill, as in previous bail-outs.

So with all apologies to Mr. Baroin, his idealistic version of reality, in which CDOs magically self fund themselves, and in which Greek bond funded pension and retirement funds see 50% losses and virtually guarantee social instability and civil war, is about to fall apart.

Yet the real kicker is the following: the whole Greek "restructuring" with a bankruptcy is predicated upon the voluntary nature of the debt exchange transaction. And as we have now learned, it was voluntary up until 21%. At 21.01% it becomes involuntary... and hence triggers CDS according to even that most corrupt of deterministic organizations, ISDA.

And once there is an official Event of Default, and the multi billion CDS complex starts collapsing on itself, exposing the whole premise of "gross exposure is not net" due to bilateral netting for the lie it is, the not even the loftiest lies and the most incredible propaganda won't do anything to lift the offer in the EURUSD.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
holdbuysell's picture

Someone in Europe better call HP. They gonna need the ultra super jumbo ink cartridges.

Ahmeexnal's picture

Just when the weak hands had covered their euro shorts....

ka-booom

doomz78's picture

The best phrase for this insanity is," It will work perfectly fine until it doesn't...  "  So true.  Once it doesn't I don't want to think of the endgame.  Maybe they will surprise me with a world bailout.  So I guess this bailout will buy more time?  But how much?  And can they make this fiscal monstrosity of a policy actually work even short term.  I know long term the game is over, this short term positioning is fun to watch. At times moronic. This is the new normal. lol  A new Bloomberg line.  What a farce. 

theXman's picture

I think Geithner was overriden by Obama. At the same time, Treasury is delaying report on China's currency manipulation while Hillary gives speech criticizing China for currency manipulation. Looks like Tim is going to be overridden again. He should resign immediately.

nope-1004's picture

A loser and a failure of a person has no clue what "resign" means.  Sociopaths don't resign, they get "asked to take on a higher position in another department", or so they tell everyone.

He won't acknowledge that he's a failure.  He will stay where he's at until some idiot blows him in the Treasury hallways so he can go on a book tour.  That's what professional nothings do.

 

Everybodys All American's picture

Think again. Obama is as uninformed as they come.

Bobbyrib's picture

Maybe Geithner remembered the way the Europeans treated him on his last trip.

Fíréan's picture

proverbial

Guillotine for Giethner !

4horse's picture

-

-

Think again. Obama is as uninformed as they come.

...and again. Obama is as uniformed a toysoldier, le rouge et le noir, as any heretofore placed gamepiece on the grand chessboard

 

1913-                                                   check

 

positions everybody?  .  .  .  ok. PNAC. let's do this lookin like we've done it before

 

sound off,  1     2

brigades ready! and, marchingorders, again armegeddon, all deployed across the castlefloor in their redtunics,blackhats&erect rifles right down to each little individual rothschildt

sound off,  3     4

long positioned, preemptively, toward what for a quadrillion reasons was to inevitably be, first) not just another noisy budgetbattle but, bombs-bursting-in-air) an all-out for alltime worldwide moneywar

 

 

before, tabula rasa, and zero, WW

 

 

sound off:                   which, without www and the likes of zh, is where        -                                  we'd already be 

                                                           nyt,tv,king-of-all-media Slaughter

 

 

 

 

soundoff 1  2, 1  2,  WW 3 4

Fish Gone Bad's picture

What the fuck is that supposed to mean???  Let this be a lesson to anyone reading this, don't type shit for the world to see on a widely read site when you are high. 

4horse's picture

-

  -

don't type shit for the world to see on a widely read site when, fish-gone-bad, you are long already-rotted from the head down

 

fgb to the bone

falun bong's picture

OK...I'm backing up towards the door...reaching behind me for the doorknob...no sudden movements...frozen smile in place

Mike2756's picture

Nope, no more bailouts, the natives are restless. The EU tried taking the soft approach vs. the Bernank thermo-nuke bazooka and it's not gonna work.

FL_Conservative's picture

Not this cowboy!  Been averaging down all during the squeeze, since I know that house of cards was built on loose sands.

Randall Cabot's picture

Oct 15, 2011 2:16 PM ET

 

"We heard encouraging things from our European colleagues," Geithner told reporters after the meeting. "The plan has the right elements."

http://www.bloomberg.com/news/2011-10-15/g-20-tells-europe-to-deal-decisively-with-debt-crisis-at-oct-23-summit.html

Mugatu's picture

Its time for the bill and everyone is acting like they are pulling for their wallet, but no one ever pulls the wallet out - classic cheapskate trick!

zorba THE GREEK's picture

Mugatu... That's the best time to go to the lavatory.

Hansel's picture

Words can only hurt if you read them!  Don't listen to Mugatu!!!

Mugatu's picture

It's that damn Hansel! He's so hot right now.

navy62802's picture

This is just for media consumption. Behind the scenes, you know Geithner is making promises like a little bitch.

BoNeSxxx's picture

Yup... and we will find out what the promises were in late 2012 through a FOI request or a Congressional hearing.

 

Unless, of course, we find out earlier via pitchforks, tar, and feathers.

Mr Lennon Hendrix's picture

Geithner loves spending American taxes to give to the Global Banking Houses.  So he is talking out of both sides of his mouth?  Nothing new.

Now if only Israel would bomb Iran already, then the banksters could get away with another bailout.

max2205's picture

Good God, love the ' G.A.D'. Learn to love the Bomb.

ptoemmes's picture

If you can get past the head exlpoding setting of Liesman interviewing Geithner your head can explode during the interview.

At 4 Oct 2011 12:29PM ET

Exclusive Interview with Timmah

http://www.cnbc.com/id/44875650

I'd excerpt, but I really don't know what to excerpt

========================================

At 14 Oct 2011 10:25 AM

US to Play 'Very Major Role' In Helping Europe: Geithner"

http://www.cnbc.com/id/44902075

==========================================================

But at 14 Oct 2011 10:44AM appears to be an announcement related to this top post

US Rejects Plan to Strengthen IMF In Euro Zone Crisis

http://www.cnbc.com/id/44902738

===========================================================

Finally, just a few minutes ago

http://www.youtube.com/watch?v=oep4mRpmrkQ&feature=fvst

 

 

 

Fíréan's picture

In the first interview Steve Liesman with Geithner , which you linked to above, he is very specific when refering to "us", "they", "them" etc., to cover himself himself and inform to whom his is refering, and yet he is not clear ( and neither am i as the reader ) to whom he is refering in this answer when he states that

TIM GEITHNER: Well, you know, basic rule of-- financial crises management is you want to make sure that you have a level of resources that are larger than the potential needs you face. And if markets see that then they'll have the incentive to continue to lend, invest-- take exposure to those countries. And so what they're trying to-- Europeans are trying to do is to find ways to increase-- to dramatically increase the effective financial capacity of their fund.

 STEVE LIESMAN: How big does that bazooka, so to speak, have to be? Canadian Governor Mark Carney said before he left for-- for Paris that he was looking for $1 trillion euros or more. Do you have a number?

TIM GEITHNER: No lots of ways to assess that. Again what the-- what you need is the clear commitment by the governments that they'll do what's necessary to hold us together and that they'll put as much resources behind this as is necessary. And you know, that's what they're trying to do.

Who is the "us" to whom he is refering in the context of that answer  ?

The european governments must must do what's necessary to hold us together ?

AldoHux_IV's picture

The black hole that is our current global monetary/fiscal system is getting bigger and soon no one central banked sovereign will be safe from the event horizon.

Haven't we been effectively bailing out the insolvent European banks via the fed and it's dollar funding facilities? Through the veil of shits and illusions of central banking and emergency 'temporary measures' we've been throwing bailouts left and right and through our legs and even handing them out with no-look passes.  Of course by 'we' I mean the official 'we' and probably soon to be the dictator 'we'.

From all aspects: market reactions, politician rhetoric, policy-making goofs, and the idiotic pursuit of using debt to enslave more people under the already crushing size of existing debt-- this crisis has been one sad fucking joke.

Skid Marks's picture

Factsheet

Where the IMF Gets its Money

http://www.imf.org/external/np/exr/facts/finfac.htm

 

 

IMF Members' Quotas and Voting Power, and IMF Board of Governors

http://www.imf.org/external/np/sec/memdir/members.aspx

DollarDive's picture

There are no more - independent governments.  The IMF is the ruler of the world.  They are the OZ behind the curtain, pulling the levers - making the deals - out of view from the sheeple.  World governments are really just puppets that are controlled by the IMF.  The puppet strings are loans made to the governments from the IMF.

legal eagle's picture

Intentionally Mad Fund

I only kill chickens and wheat's picture

Hell he even knew to check his right and left flanks, a true soldier of the banking industry.

Bobbyrib's picture

Being that it was Turkey, I wouldn't be surprised if no one heard from those kids ever again.

Esso's picture

Obviously gun control is working as intended in Turkey, unfortunately.

monopoly's picture

This is never ending. Until it is over.

bigwavedave's picture

Old news that came at lunchtime Friday not after the close. You must have been napping. (12:24:34 PM) twitter.com: Reuters: U.S. rejects plan to strengthen IMF in euro zone crisis http://t.co/aJclxs9k

 

mfoste1's picture

It is very clear what is going on....the US will certainly bail out EZ. This will take course of every other bailout. They will argue, argue and argue some more until scumbag politicians finally give in. Why will this happen?  This will be a great disguise for a 2nd round bailout of US banks for trillions.....

Skid Marks's picture

"THEY" will NOT allow the EZ to go down in flames.

Take that to the bank.

ZippyDooDah's picture

Put a fork in the EU.  And while you're at it, put a fork in the banks.

knukles's picture

Here's my take... a tidge of game theory.
If one concludes that regardless of the amount of new debt piled upon old debt within the ECB/EU/European banking system clusterfuck dead as a forgone conclusion doornail then....
The "optimal" financial resource allocation for the US Fed/Treasury is to forgoe any and all further contributions to the IMF/BIS/whateverthefucks and save said ammunition for....

The next TARP/QE to directly "save" (as in bail out the bankers bonus pools once again, who happen to be the Big Campaign Contributors) the US banks from not necessarily their direct loan and debt exposure, but right now, the Who The Fuck knows internicine mess of Counter-Party Risk with all the swaps, CDS, etc.  
Watch.  It'll be once again find the fucking bag holder (AIG last time around) who insured all the screwball risk contracts that nobody can figure out for the terms thereof (what is or is not risky) and thus what is value...  who is gonna suck the proverbial hairy end of the lollipop and thuus be the cancerous transmission mechanism for the rest of the infrastructure. 
The systemic risk bag holder.
That fuck gets bailed, the shit's settled at full values and whoopie doopie, biznez as normal. 

Fuck Europe, the problem's right here at Home in River City.

Plus, what with Solargate, Fast n' Furious, SaudiAmbassadorGate, Mexico Drug Cartels (they're everywhere, they're everywhere) and now US troopis boots on the ground in central Africa, bailing out a bunch of foreign banks might not play too fucking well in Dubuque with Ma and Pa Kettle... not with campaign/elections now in a 24/7 cycle.

rocker's picture

 I like the way you think. Who will get bailed out next. The debate is now hindged on 50% more or less of a haircut for the bondholders of the PIGS debt.

 We need to remember that, yes, some of our banks do own some of the bonds or hold contagion of banks over seas who own the bonds.

Either way, Big Ben will want to Bail Out them to bail out, guess who, Goldman Sachs. The wonderful people who had AIG cover their backs.

And where did that get AIG?  Hmmmmm.

But don't worry, guess who has GS's back.

Republican Judd Gregg is a Goldman Sachs Advisor Board Member.

So, how much will Goldman profit again from the demise of another group of banks.

knukles's picture

LOL

Congressmen as advisors to Goldie.  Advisor my ass.
And thinking about it more, betcha the marching orders to cease and desist were made by lloyd, Jamie, et.al, seeing the opportunity for the next Banker's Enrichment Act of 2011/2.

I mean, it's not hard to imagine that kinda crap at all with what goes on these days.

Bobbyrib's picture

Dudd Gregg is a fine, upstanding politician. How dare you attack a great man like Mr. Judd Gregg! /sarcasm.

mraptor's picture

It is called Triffin dillema.

If you have the reserve currency you have to bail out everybody OR lose the reserve status.

Simple as that.

The point is they dont want to lose reserve currency status, so they will bailout everybody.

And Europe will bail out everybody from the Euro Union too. It is just different scale.

 

Market Efficiency Romantic's picture

Make any regulator and Senate/congress member arguing for the non-acountability and freedom of regulation of deriavtives vote only with the backing by their personal wealth. Wonder how quick you would get an effective derivative regulation?

Market Efficiency Romantic's picture

In that strategy game of yours, you missed one important variable, maintaining USD as global reserve currency. That, if wished, requires playing the lender of last resort or bail-out wonderboy. In that case, the increase of power and control and the access of US banks to currency and liquidity needs to compensate the US spending abroad instead of nationalized recapitalizations.

Basically, that is what the world is trying to convey to Merkel, if you want Germany relying on a reserve currency status of the EUR, controlled by Deutsche Bank with very positive effects on German export business, you have to show the power of the controller of a reserve currency now. Only that in the EU, it is not comparable, as Germany is no sovereign itsself in the monetary sense. That's like financing a car, letting everyone in the neighborhood drive it without restriction and without any right to ever get behind the steering wheel yourself.

HoofHearted's picture

The point at the end of this piece is what is well taken...if the CDS for Greece have to be paid off...BOOM!!!!!

cossack55's picture

Enough with the Franco-German. Time to update.

Frank-Kraut

vichyssoise-kartoffel

Maginot-Siegfried

Wine-Beer

Citroen-Mercedes

Something more current, or even better, funny.

knukles's picture

Sarkozy-Merkel (OMG, now look what I've got us into)

(Does anyone have a burning desire?  Hi it's me Knukles and I'd like to cornhole someone today.  Can I come to the G-20 meeting and play fuck your buddy and the peasantry.  Are they having it at Versailles this time around?  How the fuck much is this gonna cost us this time?  Has that comet/meteor Elenin hit anyplace yet?  Do they all have birth certificates?  Why do they have birth certificates?  Mommy, I can't sleep.)