Business

Head of IMF Calls for More Bailouts and Government Intervention

Moneytalks: Head of IMF Calls for More Bailouts and Government Intervention

Christine Lagarde, of France, managing director of the International Monetary Fund, and Agustin Carstens, governor of the Bank of Mexico, have coffee before the morning session of the Economic Policy Symposium at Jackson Hole in Moran, Wyo., Friday, Aug. 26, 2011. (AP Photo/Reed Saxon)

The 2011 Economic Policy Forum held in Jackson Hole, WY, featured several distinguished speakers. Most notable among them was the head of the International Monetary Fund (IMF), Christine Lagarde.

In her speech, her first since replacing the disgraced Dominique Strauss-Kahn, she addressed the world economy and unveiled her strategy for rescuing both America and Europe from faltering economies.

“The global economy continues to grow, yet not enough,” she said before the crowd. “Some of the main causes of the 2008 crisis have been addressed, yet not adequately.”

“Resolving the crisis would require two key re-balancing acts—a domestic demand switch from the public to the private sector, and a global demand switch from external deficit to external surplus counties,” Lagarde confidently asserted before the forum’s attendees.

She continued, “But the actual progress on re-balancing has been timid at best, while the downside risks to the global economy are increasing.”

Having thus set the stage for her plan, she launched into a presentation of a multifaceted strategy to “save” the world economy.

“We need a new approach—based on bold political action, with a comprehensive plan across all policy levers, implemented in a coordinated global way. A major cause of the crisis was too much debt and leverage in key advanced economies,” she said.

“In 2008, governments took bold action to prevent a calamitous collapse in demand. They offset private contraction with fiscal expansion and used public resources to recapitalize financial institutions. They strengthened financial regulation, and reinforced the capacity and resources of international institutions. And monetary authorities did their part as well. Global growth is also being held back by policies that slow demand in some key emerging market economies while balance sheet risks are increasing in others,” she said.

She then went on to propose a series of actions that would, “Deliver savings tomorrow which, in turn, will help to create as much space as possible for supporting growth today—at least by permitting a slower pace of consolidation where possible. Among these actions were, “Measures that change the rate of growth of entitlements, health, or retirement.”

She then directed her attention toward Europe and claimed that the best route to recovery, as far as she could tell, would be to enable “more financing” for the banks.

“Banks must recapitalize,” she flatly stated and that, “Sufficient financing can come from the private or official sector—including continued support from the ECB [European Central Bank], with full backup of the euro area members.”

Recapitalization can be done for a number of reasons: ensuring against a hostile takeover, minimizing tax losses or implementing an exit strategy for venture capitalists. Companies often want to diversify their debt-to-equity ratio to improve liquidity (the degree to which an asset or security can be bought or sold in the market without affecting its price). A good example is when a company issues stock in order to buy back debt securities, thereby boosting its proportion of equity capital as compared to its debt capital.

However, what Lagarde is most likely advocating is a “leveraged” recapitalization of the banks, that is, a change of the capital structure of the banks by substituting equity for debt by issuing bonds to raise money, and by using that money to buy the company’s stock or to pay dividends.

Restructuring a bank using this method involves a deposit insurance fund, as in a bailout of a failing bank, where the insurance fund pays the acquiring bank the difference between the book value of a troubled bank’s assets and the estimated market value. The insurance fund may also take an equity position in the restructured bank.

What is odd about this is that recapitalizing the banks will most likely have a negative effect on investor confidence (something she claimed she wanted to improve). Leveraged recapitalization in a bank increases its liabilities (because of the extra debt) while reducing its equity. This tends to make it unattractive to anyone who is interested in the financial longevity of said organization.

What is even more interesting is that she suggests recapitalizing the banks after volunteering the private sector as the first to help in these efforts (followed by the European Central Bank). How will the private sector provide for this refinancing? How will the European Central Bank help finance?

Tax first and (perhaps) print money later.

“Europe needs a common vision for its future. So Europe must recommit credibly to a common vision, and it needs to be built on solid foundations—including, for example, fiscal rules that actually work,” she said.

After her plan for Europe, she addressed the U.S.

She began by incorrectly stating that, “A fair amount has been done to restore financial sector health,” but also notes that, “house price declines continue to weaken household balance sheets.”

She then went on to say that she believes the cure with America lies in, “Credible decisions on future consolidation—involving both revenue and expenditure—create space for policies that support growth and jobs today.”

However, the “Ah-ha!” moment occurred when she encouraged American politicians to be more intrusive in regards to the housing market:

“[Halt] the downward spiral of foreclosures, falling house prices and deteriorating household spending. This could involve more aggressive principal reduction programs for homeowners, stronger intervention by the government [emphasis added] housing finance agencies, or steps to help homeowners take advantage of the low interest rate environment.”

She framed all of her strategy, of course, through the prism of moral urgency:

“As in the first phase of the crisis, we have reached a point where actions by all countries, doing what they can, will add up to much more than actions by a few. There is a clear implication: we must act now, act boldly, and act together,” she sermonized in her peroration.

Fortunately, not everyone agrees with Lagarde. European Central Bank President Jean-Claude Trichet scoffed at the suggestion that the banks need to be recapitalized and said that measures already taken would “prevent a liquidity crisis in the European banking sector.”

It is also interesting to note that Angela Merkel, considered the “most powerful women in the world” and on whom the hopes and fate of the euro zone rest, agrees with Trichet.

Comments (131)

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  • llotus
    Posted on August 30, 2011 at 10:08pm

    Jackson Hole Wy? Lotus.

    Report Post »  
    • INOGAWD
      Posted on August 30, 2011 at 10:44pm

      DUMP.NATO. now !!!!!! waste of our Tax Dollars…Kiss Off Bict**..
      Viva La France, Se La Guerre and all that other Bullshi** Go Home..
      Take Your Rapeist With You, mon amie……….

      Report Post » INOGAWD  
    • TSUNAMI-22
      Posted on August 31, 2011 at 1:28am

      I say we start printing French currency by the trillions and just drop it in to France while they sleep.

      The country would begin to collapse overnight.

      Report Post »  
    • markthemark
      Posted on August 31, 2011 at 11:15am

      YOU’RE MISSING THE POINT. SHE LIVED IN CHICAGO AND WAS FRIENDLY WITH THE DALEYS. ALL ROADS LEAD BACK TO CHICAGO AND THE OBAMA THUGS. NO WONDER SHE WANTS US/USA TO SPEND MORE MONEY WE DON’T HAVE. SAME SONG/SECOND VERSE. http://www.myfoxchicago.com/dpp/news/metro/french-finance-minister-christine-lagarde-influenced-look-of-chicago-20110325
      -Chicago – The most powerful woman in the government of France was back in Chicago today. The world knows Christine LaGarde as President Sarkozy’s Minister of Finance. Fewer know her role in remaking the look of Chicago, a city she calls her “second home.”

      Report Post »  
  • WhoIsTheCoon
    Posted on August 30, 2011 at 10:05pm

    @republicorp it was riddled with other objects he disagreed with.

    Who cares what the French B*tch says? Not this guy..If you ain’t American your decisions on America mean NOTHING.

    Report Post »  
    • teddie888
      Posted on August 31, 2011 at 4:17am

      bach in the 60′s an economist (forgot his name) thought that by tying countries economies together no one would start a WWIII. because if 1 fell the rest would follow.
      hence the wars in the Middle East due to them not in the fold and we always need some war conflict to be in for the economy unless you can tell me a time when we weren‘t in a war even if they won’t label it such. Like the non-war we’re in in Libya which is no threat to USA, yet there we are

      Report Post »  
    • TheTruthPlease
      Posted on August 31, 2011 at 9:09am

      Yea, comrade obummer cares what she thinks…this looks eerily similar to a Reuters story about a “white house” mortgage plan. He is after all only a caretaker of the United States and not it’s President. It serves his purpose; think “new world order”. If you still don’t have a plan; Doom on you! 2+1=safety for you and yours…
      Pro Deo et Patria

      Report Post » TheTruthPlease  
  • Ghandi was a Republican
    Posted on August 30, 2011 at 9:45pm

    Let there be no doubt that General Sore-azz‘ 50 Czars are doing his ’organizing’ and running the World through this shadow Government disguised as a Presidential administration..

    Report Post » Ghandi was a Republican  
  • oriondma05
    Posted on August 30, 2011 at 9:40pm

    I think everyone missed the most important thing: why isn’t the MSM talking about her tanned complexion like the did with John Boehner? She spends way too much time at the golf course/beach.

    Report Post » oriondma05  
    • Mimi24
      Posted on August 30, 2011 at 10:54pm

      That’s a woman? Heck, the tan’s the least of her worries.

      Report Post »  
    • oriondma05
      Posted on August 30, 2011 at 11:22pm

      @MIM – You know it does sorta look like an older, over-cooked Julian Assange.

      Report Post » oriondma05  
    • thinkinghuman
      Posted on August 31, 2011 at 10:41am

      It’s 4:30 and she has MAXIMIZED her tan

      Report Post » thinkinghuman  
  • RepubliCorp
    Posted on August 30, 2011 at 9:28pm

    I would like to know where the politician gets his money from. I think it shows a lot about the candidate so that is why Ron Paul’s vote of NO on requiring lobbyist disclosure of bundled donations bothers me (HR 2316). This vote is especially interesting considering in 2000 Ron Paul adopted the following statement from the Republican Liberty Caucus, “There should be full and timely public disclosure of all the sources and amounts of all campaign contributions upon their receipt.”

    Report Post » RepubliCorp  
    • Vechorik
      Posted on August 31, 2011 at 12:09pm

      “Government-to-government transfers through a middleman like the IMF cannot produce real growth. When capital remains in private hands, it is allocated to its most productive uses as determined by the choices of consumers in the market. Placing capital in the hands of politicians and bureaucrats inevitably results in inefficiencies, shortages, and economic crises, as even the best-intentioned politicians cannot know the most efficient use of resources.

      American taxpayers already lend various governments more than $5 billion annually through the IMF, at a yearly cost of over $300 million because of loan defaults and subsidized interest rates. Now the IMF wants to double its pool of funding, which will put taxpayers on the hook for $12 billion in loans at a cost of about $750 million each year. Furthermore, since the IMF creates “drawing rights” accounts that are redeemable in US dollars, it in essence prints US dollars when it increases those drawing rights. This is a clear violation of our national sovereignty, and a vivid example of why we should stop participating in international schemes like the IMF altogether.

      The IMF and other complex schemes only serve to obscure the real issue: Why should US taxpayers be forced to send money abroad? Certainly the Constitution provides no authority for foreign aid. In historical and practical terms, redistribution of wealth from rich to poor nations has done little or nothing to alleviate suffering abroad. ” 09/28/2004

      Report Post »  
    • Vechorik
      Posted on August 31, 2011 at 12:14pm

      You nut, Ron Paul INTRODUCED IT — The Fair Sentencing Clarification Act, H.R. 2316, was introduced by Representative Bobby Scott (D-VA) and co-sponsored by Representatives Ron Paul (R-TX); Roscoe Bartlett (R-MD); John Conyers (D-MI),”

      If he didn’t vote for it, then it contained other agendas that were unconstitutional. Paul never votes for anything that is unconstitutional.

      Report Post »  
    • Airb0rne4325
      Posted on August 31, 2011 at 2:35pm

      http://www.foxnews.com/politics/2011/08/25/study-80-percent-lawmakers-lack-academic-background-in-business-economics/

      This is not just a prob here in the US it is worldwide. People who don’t know what theyare talking about or have never been in charge of some thing (BHO) are making the decisions. I wouldn’t trust my plumber to remove my appendix, just like I don’t trust a community organizer to be the Cheif Excutive Officer of the country.

      Report Post » Airb0rne4325  
  • Gypsy123
    Posted on August 30, 2011 at 9:21pm

    She wants tax payers to bail out more countries. Sister it is not going to happen we have given all we got until we don’t have anymore. They need to pull themselves out of the hole they dug

    Report Post » Gypsy123  
    • INOGAWD
      Posted on August 30, 2011 at 11:09pm

      The friggen Piggy Bank is EMPTY..someone tell Obama or
      he’ll just keep on giving, Time to say NO, BO.goes for MO too..
      WHY does she need over 20 STAFFERS ????????????????
      and isn’t she ABLE to do her own make-up and Hair ? HMM !

      Report Post » INOGAWD  
    • Mil Mom
      Posted on August 30, 2011 at 11:58pm

      @Gypsy123
      Posted on August 30, 2011 at 9:21pm
      She wants tax payers to bail out more countries. Sister it is not going to happen we have given all we got until we don’t have anymore. They need to pull themselves out of the hole they dug
      ***
      From what I’ve heard on Glenn, Seann & Rush, more of TARP, and both Stimulus, went to EU banks than did domestic ones. They probably just figure, (maybe accurately) that we’ll sell more of our freedoms to Communist China to give them more.

      Report Post » Mil Mom  
  • mnorris
    Posted on August 30, 2011 at 9:21pm

    One look at this picture an I thought “lesbian”…lo and behold, I was correct…does this make ME bad?

    mnorris  
    • scuba13
      Posted on August 30, 2011 at 10:38pm

      So that’s not the Wikileaks guy? Damn my lenses are fogged up again.

      Report Post » scuba13  
    • Mimi24
      Posted on August 30, 2011 at 11:02pm

      No. He’s prettier than her and has better hair.

      Report Post »  
    • noahsdove
      Posted on August 31, 2011 at 1:11pm

      no, she’s a cute little lesbian….probably knows a lot about herb gardening, and antiques, and where to find the best lesbian prostitutes

      Report Post »  
  • Chakam
    Posted on August 30, 2011 at 9:08pm

    Take the money. Go ahead. Patriots are self reliant. We are able to survive without. We are unafraid. Rape the economy. Destroy the dollar. Enslave the sheeple. You will never get us.

    Report Post » Chakam  
    • noahsdove
      Posted on August 31, 2011 at 1:09pm

      You’re already a slave….how do you pay your bills?…..How do you get around?….What do you eat?….No one escapes the beast…Don’t you know that?…..All that’s left is the marks on our hands…The only one who is truly free is a Christian hobo…wake up…

      Report Post »  
  • leftcoastslut
    Posted on August 30, 2011 at 9:05pm

    when did it start that the IMF controlled us, who sold their soul? shame on you.

    Report Post »  
    • vennoye
      Posted on August 30, 2011 at 11:03pm

      Research on Dominique Strauss-Kahn and his thoughts on this was interesting…..looks as though he was not in step with what others wanted to do!! You can thank Woodrow Wilson for where we are now:
      Sadly, President Woodrow Wilson did not read and heed the warning of President Andrew Jackson and in 1913, President Wilson signed the legislation that created the Federal Reserve. Years later, President Wilson acknowledged the harm he had brought to America.

      A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men…We have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world-no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men..

      Report Post » vennoye  
  • babylonvi
    Posted on August 30, 2011 at 9:03pm

    It appears that Fraulein Lagarde and her Globalist Banker Gestapo are not finished destroying the economy of the Western world and need just a yet larger crash before they can buy up the crumbling remains at little or no cost.

    Report Post » babylonvi  
    • Mil Mom
      Posted on August 31, 2011 at 12:05am

      @babylonvi
      Posted on August 30, 2011 at 9:03pm
      It appears that Fraulein Lagarde and her Globalist Banker Gestapo are not finished destroying the economy of the Western world and need just a yet larger crash before they can buy up the crumbling remains at little or no cost.
      ***
      Quick! I need a Geography lesson! How close to the “Badlands” is Jackson Hole, Wyoming, is this a re-incarnation of the notorious “Hole-In-The-Wall Gang?

      Report Post » Mil Mom  
  • nptden
    Posted on August 30, 2011 at 9:00pm

    Time to expose the IMF as part of the NWO. Not a penny from America should be given. Let them sink. The whole Global concept is Marxist inspired. We don’t need them.

    Report Post » nptden  
  • ALL4FREEDOM
    Posted on August 30, 2011 at 8:58pm

    Why not try the Three Stooges approach? An outside party gives Moe 10 bucks. Larry taps him on the shoulder and says, “You owe me 20.” Moe says, “Well, here’s 10, and I’ll owe you 10.” Curley taps Larry’s shoulder saying, “Hey, you owe me 20.” Larry responds, “Here’s 10, and I’ll owe you 10.” Moe then taps Curley, “You owe me 20.” Says Curley, “Here‘s 10 and I’ll owe you 10.” Then Moe, cash in hand once again, says to Larry: “Here’s the 10 I owe you.” Larry to Curly: “Here’s the 10 I owe you.” Curly to Moe: “Here’s the 10 I owe you. Now we’re all even!” And the three of them stand there with a puzzled expression, not quite sure what just happened. But they did just wipe out all their obligations. So, just scale it up. Have the IMF issue, say, a $10 billion grant (not loan) that can only be used to pay sovereign debt, to a sovereign debtor, who starts the process. Ping-pong that puppy around as many times as needed to wipe out huge chunks of soverign debt (everybody owes everybody else). National balance sheets will look much better and the game can begin anew. This works because the money isn’t real to begin with. Maybe we should then go back to using real money and stop the insanity, as Ron Paul suggests.

    Report Post »  
  • christos
    Posted on August 30, 2011 at 8:51pm

    ……Tightening the engineered N.W.O. order net digging a pit for others they will fall into +JESUS+ won’t fail us the +HOLY SPIRIT+ is the only thing holding these beast worshipers back until +GOD+ brings in the rest of the gentiles for rapture +GOD+ is so thoughtful thank you +GOD+ for your only begotten +SON JESUS CHRIST+ we Love you much…….

    Report Post » christos  
    • robstoddard
      Posted on August 30, 2011 at 9:24pm

      Ive read the bible and saw no mention of the rapture. Sorry bud, you’re stuck here. There is no escape!

      Report Post » robstoddard  
    • Mimi24
      Posted on August 30, 2011 at 11:13pm

      It may not be called the rapture, but caught up to be with the Lord is close enough for me.

      Report Post »  
    • vennoye
      Posted on August 30, 2011 at 11:16pm

      Rob
      Have to agree with you, but the good news is that the first ones out of here aren’t going to a good place…….
      Matthew 13:30 Let both grow together until the harvest: and in the time of harvest I will say to the reapers, Gather ye together FIRST the tares, and bind them in bundles to burn them: but gather the wheat into my barn.

      Report Post » vennoye  
    • Mil Mom
      Posted on August 31, 2011 at 12:24am

      Amen!

      Report Post » Mil Mom  
  • jefferson1743
    Posted on August 30, 2011 at 8:49pm

    I want out of NATO and no more contributions to the IMF!!!!!!!!!!!

    Report Post » jefferson1743  
  • nptden
    Posted on August 30, 2011 at 8:45pm

    Same ole Commie dribble. Screw the world bank. Screw these Commies that want us to pay the freight.

    Report Post » nptden  
  • We the people of the republic
    Posted on August 30, 2011 at 8:38pm

    WE ARE IN TO DEEP.
    The American DREAM is a thing of the past
    We will only have our memories because of the mass in support of the lies.

    Report Post » We the people of the republic  
    • noahsdove
      Posted on August 31, 2011 at 1:18pm

      The word too has 2 o’s dude. But you are right….to hell with spelling. We in too deep to pull out now America was one bright shining star in the world for a pretty long time, and now it’s waning….you can’t be everything to everybody or you end up in the poorhouse. My question is when is the average working slob in the usa going to stand up en masse and stop giving their money to their old, perverted, lying, overindulgent uncle Sam?

      Report Post »  
  • heyjim55
    Posted on August 30, 2011 at 8:37pm

    She is the grim reaper of nations the IMF is nothing more than a global maffia family providing loan shark type deals to countries that are in serious debt. They loan money at interest rates that can’t be paid back and then use that nations natural resources, utility services, national parks and anything of value as colateral. In other words they rape and pillage and they have their eye on us down the road.

    Report Post »  
  • TOPOFTHEGAME
    Posted on August 30, 2011 at 8:37pm

    This woman, LaGarde head of the IMF was from a law firm years ago. in Chicago and is part of part of the NWO and THE pRESIDENT IN CHIEF knows her well. I believe that DSK was SET UP and had to step down, just happen to have LaGarde waiting in the wings. Obama is setting us up for a world government. Just lack the collapse of the Euro……………

    Report Post »  
  • 00gabooga
    Posted on August 30, 2011 at 8:33pm

    I think it’s nice of her to grow her eyebrows out and then donate the clippings to cancer patients.

    Report Post » 00gabooga  
  • progressiveslayer
    Posted on August 30, 2011 at 8:18pm

    She wants the government to halt the downward spiral of foreclosures,she’s a fool the government caused the housing market collapse with forcing banks to make loans to everybody regardless of their credit worthiness.When government intervenes in most anything it becomes FUBAR just like Barrys hero FDR he prolonged the depression Barry will do the same with the obama depression that’s coming soon.

    Report Post » progressiveslayer  
  • Seymour
    Posted on August 30, 2011 at 8:15pm

    With all due respect Ms. Christine Lagarde the last thing we American’s need is a female Barack Obama especially from Europe so take your opines and suggestions back with you to Europe with our thanks but no thanks. What the hell is she doing here in the first place?

    Report Post »  
    • ProbIemSoIver
      Posted on August 30, 2011 at 8:42pm

      She is one of the Bilderberg’s cronies. They are your “politicians” bosses. Both DEM. and REP.
      You didn’t know almost ALL of our politicians answer to a “secret” society?
      Welcome to the real world !!! You can take the blue pill and go back to that steak, if you like.

      Report Post » ProbIemSoIver  
  • kickagrandma
    Posted on August 30, 2011 at 8:07pm

    What is “IMF”? I’M F____?

    Sorry, I’ve just had it up to the top of my worn out old rubber girdle boys and girls………………………

    ARGHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!

    Thank YOU, LORD, for patience. Right now!

    Report Post »  
  • progressiveslayer
    Posted on August 30, 2011 at 8:06pm

    Resolving the crisis would require two key re-balancing acts—a domestic demand switch from the public to the private sector, and a global demand switch from external deficit to external surplus counties,” Lagarde confidently asserted before the forum’s attendees.Good luck with that switch from public sector to private sector with the Marxist running America into the ground,his answer to all problems is more government the be all and end all to every problem.No, the only out of this is to vote out the Marxist narcissist in chief and rid the entire government of communists progressives and socialists.

    Report Post » progressiveslayer  
  • heavyduty
    Posted on August 30, 2011 at 8:01pm

    She needs to go back to her country and stay there. Obambi doesn’t need any more ideas on how to fix the economy.

    Report Post »  
    • Rajabear1
      Posted on August 30, 2011 at 8:34pm

      Hello Heavyduty, Unfortunately, I do believe she is from OUR country. If I’m not mistaken, Chicago, to be more precise. I know they seem foreign there, but sadly they are still fellow Americans. Oh my, I think I just threw up a bit in my mouth writing that. I do apologize for those fighting the good fight in Chicago, the few that are there, this comment was not meant to offend you.

      Report Post »  
  • tower7femacamp
    Posted on August 30, 2011 at 7:56pm

    http://news.bbc.co.uk/2/hi/4290944.stm

    Report Post » tower7femacamp  
    • ProbIemSoIver
      Posted on August 30, 2011 at 8:07pm

      Wrong answer, IMF. the TEA PARTY says no more bailouts or government Intervention. WE CALL THE SHOTS !!!
      Tell your global associates. lol. CLOWNS !!!!

      Report Post » ProbIemSoIver  
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