Daily Archives: May 12, 2010

US is on the Hook at the Tune of $50 billion and Climbing for European Bailout Fund

A report by CNBC finds the US share of the European Bailout could rise to $50 billion and higher:

The US exposure to the European debt bailout could be at least $50 billion, but the chance of taxpayers actually being on the hook for that appears remote.

The actual number is unknown; It may depend on European country asking for a bailout:

Determining the exact amount of exposure is nearly impossible until governments start stepping up to the window created by the European Union and the International Monetary Fund to stem the crisis in Greece and elsewhere on the continent.

But one rule-of-thumb formula puts potential US exposure at $54 billion should the entire IMF loan fund be tapped.

The Program nick-named Le Tarp because it was similar to the US Trouble Asset Relief Program involved in currency swaps ( while TARP dealt with credit default swaps which contributed  the financial collapse in 2008):

And the entire bailout package has been nicknamed “Le Tarp” by some for its similarity to the Troubled Asset Relief Program that bailed out US companies with taxpayer-backed loans.

Critics including the GOP say the US shouldn’t be involved:

US involvement in the European crisis already has drawn critics from Congress and economists who think the domestic financial issues should be cleared up first.

“Inflation and debt is not the answer to a problem caused by inflation and debt,” said Michael Pento, chief economist at Delta Global Advisors and a critic of both the European plan and the Fed’s approach to US fiscal stability. “It’s a European problem that should have been dealt with by Europeans.”

In Washington, Senior administration officials said taxpayers will not be liable for the European bailout. (See video)

The US is a participant in the IMF, which has agreed to work with the European Union to help countries that come under debt duress.

The IMF has pledged a one-third share of the 750 billion-euro ($952 billion) rescue package—typical of the fund’s arrangements with central banks in such cases.

That would come to 250 billion euros, though that is only a rough figure and dependent on a variety of circumstances, according to an IMF official who spoke on condition of anonymity because of the uncertainty still involved.

The US would be responsible for 17.09 percent, or $54 billion, of the cost using a quota contribution system the IMF uses in such instances. The US is the leading contributor under the quota setup.

CNBC has the rest of the story.

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Strange Bedfellows:David Cameron and Nick Clegg Create Collation Government; Gordorn Brown is Odd Man Out

A new collation government form on Tuesday in United Kingdom brought an uneasy alliance between the Tories and Liberal Democrats  at Westminster. An arrangement made on Tuesday which David Cameron became Prime Minister and Liberal Democratic leader Nicholas Clegg became Deputy Prime Minister. Sky News reports:

(Prime Minister Cameron)He told the waiting media(outside of 10 Downing St. The Prime Minister home and Offices):”On behalf of the whole country I would like to pay tribute to the outgoing Prime Minister for his long record of dedicated public service.”

And he added: “I aim to form a proper and full coalition between the Conservatives and the Liberal Democrats.

“Coalition will throw up all sorts of difficulties but I believe that together we can provide that strong and stable government that our country needs.”

Cameron spoke to President Barack Obama and  address Queen Elizabeth on the formation of the government.:

US President Barack Obama has congratulated him by telephone and Downing Street staff showed Mr Cameron’s pregnant wife Samantha around Number 10.

The couple arrived there straight from Buckingham Palace where the Tory leader had accepted the Queen’s request for him to form a new government.

Meeting with Her Majesty  came after Outgoing Prime Minister Gordon Brown announced his resignation:

David Cameron meets the Queen as Gordon Brown quits as Prime  MinisterMr Cameron accepts the job, offered by the Queen

Sky News’ royal commentator Alastair Bruce said the Queen would have asked the Tory leader the constitutional question “Will you form the new administration?” and the moment he said “Yes” he became prime minister of the UK.

Mr Bruce added: “And then his wife would have been invited into the room and they would all have had a jolly good chat.”

Mr Cameron is the 14th prime minister the Queen has dealt with.

Sky News’ royal correspondent Sarah Hughes said Mr Cameron’s audience with the Her Majesty lasted some 25 minutes.

Moments Earlier Outgoing Prime Minister Gordon Brown offered his resignation to Her Majesty:

It came just a short while after Gordon Brown quit as prime minister, telling the country he had “loved the job” and adding: “Thank you and goodbye,” before walking out of Downing Street with his wife and sons.

Beside Clegg as Deputy PM Sky News reveals other staffs:

Sky News chief political correspondent Jon Craig’s sources revealed George Osborne, long-time friend and colleague of Mr Cameron, would get the job of Chancellor of the Exchequer.

The Lib Dems’ Vince Cable will be his number two.