ALG: No Fed Bailout for European Creditors, U.S. Banks

ALG: No Fed Bailout for European Creditors, U.S. Banks

October 11, 2011, Fairfax, VA—Americans for Limited Government President Bill Wilson today issued the following statement warning of a potential Federal Reserve bailout for European and U.S. banks that bet poorly on European sovereign debt:

"With Belgian bank Dexia being nationalized, Spain and Italy having its ratings cut by Fitch, public opposition to bailouts mounting in Germany, Slovakia, and elsewhere, and a Greek default all but inevitable, it is becoming increasingly likely that Europe will be unable to contain the sovereign debt crisis to its shores.

"When it fails, U.S. financial institutions are said by the Congressional Research Service to be on the hook for over $640 billion in exposure to the European crisis. Without question the Federal Reserve, the FDIC, and others will be called in to once again prop up financial institutions here in the U.S. and around the world. Already, the Fed is intervening by providing dollar liquidity to European banks. In 2009, the Fed propped up banks with $1.25 trillion of printed money to buy bad mortgage paper, $442.7 billion of which went to foreign banks.

"This must not be allowed to happen again. Fed Chairman Ben Bernanke must not be allowed to fire up the printing presses once again to prop up the financial institutions responsible for the crisis we are in. Congressional committees should haul in Fed governors to testify and ask them point blank what the central bank is doing to prop up creditors in Europe that bet poorly on the debt of socialist governments like Greece — and secure a commitment of no more bailouts. The bankers made the bad bets. They should pay. Not the taxpayers."