In 2008, the United States government and Federal Reserve helped bailout European banks to the tune of trillions of dollars. The reactions to this by Congress and the public ensured that any future bailouts would have to be performed through the use of a proxy institution.
It appears that this proxy institution has been found, as the IMF on November 22nd just opened a new credit facility with the primary purpose of providing liquidity to sovereign nations, especially those currently in the Euro Zone.
IMF talking points on new credit facility
* IMF APPROVES CREDIT LINE PROGRAM CHANGES TO PROVIDE LIQUIDITY
* IMF CREDIT LINE CREATES NEW SOURCE OF FUNDS FOR MEMBER NATIONS
* IMF ADDS EMERGENCY FUNDING TOOL TO ASSIST COUNTRIES IN CRISIS
* IMF NEW CREDIT LINE AVAILABLE FOR SIX MONTHS TO TWO YEARS
* IMF CREATES PRECAUTIONARY AND LIQUIDITY LINE
* IMF SAYS ACCESS UNDER 6-MONTH LIQUIDITY LINE COULD BE UP TO 500% OF MEMBERS QUOTA - Zerohedge
This credit line of course needs to be funded by the member nations who have signed onto the original IMF agreements, and this includes the United States. In fact, the US provides the lion's share of the money used by the lending agency, and earlier this year, the Obama administration called for an additional $108 billion to be used for this purpose.
The IMF appears at this point to be the last remaining source the Euro Zone can rely upon as the ECB continues to delay any potential monetization, and as investors flee from European bonds. While the United States has its own liquidity issues at home, the problems with the Euro and with many sovereign nations in the EU are far more severe, and will matriculate across the Atlantic should banks and nations begin to default on their debts.
We may be in the early stages of a European bailout through the IMF, and the United States is once again funding the majority of the needed money. In the long run however, a few hundred billion dollars will only allow the EU nations to carry on for a few more months, as the problem in 2011 is much larger than in 2008, and three years ago, the required amount to save their economic system was in the trillions.
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