Bailout Revelations

Summary by Nick Smallwood

Main Point

It is now known that the US government was more involved in the Argentine bailout than it had previously admitted to. Information has been turned up that show that $100 million of the money that went to Argentina through international banks was in fact guaranteed by the New York Federal Reserve. Is this new information, in addition to the $300 million pledged by the Treasury department, desirable treatment of the international banks by the US?

The rescuers in the agreement say that this plan was needed to keep the world banking system stable, and to avoid some of the banks from seizing Argentine assets. This plan was also viewed as a long-term political plan to keep stability in Latin America through IMF imposed reforms.

However, these excuses are shaky. It is unlikely that any banks would have seized assets. Many insiders have admitted that they were willing to take a blow to their incomes and "bite the bullet" in exchange for a stronger bargaining position in the future. It is also unlikely that the IMF would be able to keep as tight a grip on Argentina, since the political position of president Raul Alfonsin is far from stable, and stringent austerity programs are very unpopular.