Let The Poor Save The Rich And The Taxpayer Save The Banks

The IMF was organized as supranational bank.  In essence, it is supposed to be unbiased.  Human nature, however, is hardly ever unbiased.  For decades the IMF defended sound fiscal principles and open markets.  Of course, one thing is for a group of European and American bureaucrats (the IMF is dominated by these groups by design) to impose an austerity program in Uruguay, demand that the Ivory Coast get their house in order, or recommend open competitive markets to Indonesia.  It is quite another however to challenge the politicians at home.

So it should come as no surprise that this morning Mr. Antonio Borges, head of the IMF's Europe Program and a citizen of a country that is already on an IMF-lead bailout plan, proposed that the rest of the world (you, me, and the taxpayers of all countries belonging to the IMF) join in the folly of buying bonds from the rich European countries who have already spent the funds raised by such bonds on their expensive life-styles. 

Being an financial engineer himself, Mr. Borges further proposed to borrow money  to buy the bonds in a special purpose vehicle, which is Wall Street's parlance for we don't want to have to show this on our balance sheet because the losses will be huge.

In essence, the IMF will use money from the world over to support the spending of a half-dozen of the richest countries in the world.   Not only that, Mr. Borges' plan will allow the banks from another half-dozen rich countries to avoid recognizing the losses for the bonds they willingly purchased for over a decade.  When Spain, Italy, and the rest finally restructure their debt (didn't the IMF said a year ago Greece had a temporary liquidity problem?) the IMF, and not the European banks who made the mistake of lending so much money to Italy and Spain, will be left holding the bag.

Why? Because as George Orwell once wrote "Some animals are more equal than others"