Brother, can you spare a billion? : the United States, the IMF, and the international lender of last resort

"Through a combination of historical case studies and statistical analysis, McDowell uncovers the defensive motives behind U.S. decisions to provide global liquidity beginning in the 1960s, moving through international debt crises of the 1980s and emerging market currency crises of the 1990s, and extending up to the 2008 global financial crisis. Brother, Can You Spare a Billion? goes beyond conventional wisdom to paint a complete picture of how international financial crises have been managed and highlights the unique role that the United States has played in stabilizing the world economy in troubled times."--Provided by publisher. Read more... Abstract: Brother, Can You Spare a Billion? explores how and why the U.S. has regularly acted, often alongside the IMF, as an international lender of last resort by selectively bailing out foreign economies in crisis. Daniel McDowell highlights the unique role that the U.S. has played in stabilizing the world economy from the 1960s through 2008. Read more... Machine generated contents note: -- Table of Contents -- Table of Figures -- Table of Tables -- Preface -- List of Abbreviations -- CHAPTER 1 - Introduction -- 1. THE PUZZLE -- 2. THE ARGUMENT -- 3. PLAN OF THE BOOK and FINDINGS -- CHAPTER 2 - The ILLR in Theory and Practice -- 1. AN INTERNATIONAL LLR: A BRIEF HISTORY OF A CONCEPT -- 1.1 The ILLR and the Hegemon -- 1.2 The ILLR and the IMF -- 2. THE IMF'S LIMITATIONS AS ILLR -- 2.1. The Problem of Unresponsiveness -- 2.2. The Problem of Resource Insufficiency -- 3. THE UNITED STATES' ILLR MECHANISMS -- 3.1. The Mechanics of Currency Swaps -- 3.2. Speed and Independence -- 3.3. Lending Capacity -- 3.4. Division of Labor -- 4. CONCLUSIONS -- CHAPTER 3 - The United States Invents its Own ILLR, 1961-1962 -- 1. MORE DOLLARS, MORE PROBLEMS -- 1.1 From Dollar Gap to Dollar Glut -- 1.2. Two Threats: The "Gold Drain" and Speculation -- 2. IN SEARCH OF AN ILLR -- 2.1. The General Arrangements to Borrow -- 3. AN ALTERNATIVE ILLR: CENTRAL BANK CURRENCY SWAPS -- 3.1. The Fed's Novel Idea -- 3.2. Who Needs the IMF? -- 3.3. How the Swap Lines Protected U.S. Interests -- 3.4. Why did Europe Cooperate? -- 4. CONCLUSIONS -- CHAPTER 4 - The Exchange Stabilization Fund and the IMF in the 1980s and 1990s -- 1. THE EXCHANGE STABILIZATION FUND -- 2. 1980s: GLOBAL BANKING AND THE DEBT CRISIS -- 2.1. The IMF's "Concerted Lending" Strategy and the Problem of Unresponsiveness -- 2.2. The ESF and "Bridge Loans": Correcting for the Problem of IMF Unresponsiveness -- 3. 1990s: PORTFOLIO FLOWS AND CAPITAL ACCOUNT CRISES -- 3.1. Capital Account Crises and IMF Resource Insufficiency -- 3.2. The ESF and Supplemental Loans: Correcting for the Problem of IMF Resource Insufficiency -- 4. CONCLUSIONS -- CHAPTER 5 - Who's In, Who's Out, and Why? Selecting Whom to Bailout, 1983-1999 -- 1. U.S. FINANCIAL INTERESTS AND ESF BAILOUT SELECTION -- 2. AN EMPIRICAL MODEL OF ESF BAILOUT SELECTION -- 3. RESULTS -- 4. CONCLUSIONS -- CHAPTER 6 - U.S. International Bailouts in the 1980s and 1990s -- 1. CASE SELECTION -- 2. THE CASES -- 2.1. Mexico, Brazil and Argentina, 1982-1983 -- 2.2. Argentina, 1984 -- 2.3. Poland, 1989 -- 2.4. Mexico, 1995 -- 2.5. Thailand, 1997 -- 2.6. Indonesia and South Korea, 1997 -- 2.7. Declining Use: The ESF is Put Out to Pasture -- 3. CONCLUSIONS -- CHAPTER 7 - The United States as ILLR during the Great Panic of 2008-2009 -- 1. BACKGROUND: "A NOVEL ASPECT" OF THE GREAT PANIC OF 2008 -- 2. U.S. FINANCIAL INTERESTS AND THE FED'S ILLR ACTIONS -- 3. AN EMPIRICAL MODEL OF FED SWAP LINE SELECTION -- 4. THE INTEREST RATE THREAT AND THE FED'S ILLR ACTIONS -- 5. TRANSCRIPT ANALYSIS OF FOMC MEETINGS -- 5.1 The Initiation of the Swap Lines and the TAF, August 2007 - December 2007 -- 5.2 Incremental Expansion of Liquidity Facilities, March 2008 - August 2008 -- 5.3. Rapid Growth of the Swap Program: September 15, 2008 - October 28, 2008 -- 5.4. Swap Lines for Four Emerging Markets: October 29, 2008 -- 6. CONCLUSIONS -- CHAPTER 8 - Conclusions -- 1. CONTRIBUTIONS -- 2. THE FUTURE OF THE UNITED STATES AS ILLR -- 3. POLICY IMPLICATIONS -- 4. FINAL THOUGHTS -- BIBLIOGRAPHY -- APPENDIX Cover 1 Brother, Can You Spare a Billion? 4 Copyright 5 Dedication 6 Contents 8 Figures 12 Tables 14 Preface 16 Abbreviations 20 1. Introduction 22 1. The Puzzle 24 2. The Argument 28 3. Plan of the Book and Findings 32 2. The ILLR in Theory and Practice 39 1. An International LLR: A Brief History of a Concept 40 1.1. The ILLR and the Hegemon 41 1.2. The ILLR and the IMF 43 2. The IMF’s Limitations as ILLR 45 2.1. The Problem of Unresponsiveness 46 2.2. The Problem of Resource Insufficiency 48 3. The United States’ ILLR Mechanisms 51 3.1. The Mechanics of Currency Swaps 52 3.2. Speed and Independence 52 3.3. Lending Capacity 54 3.4. Division of Labor 58 4. Conclusions 61 3. The United States Invents Its Own ILLR, 1961–​1962 62 1. More Dollars, More Problems 63 1.1. From Dollar Gap to Dollar Glut 64 1.2. Two Threats: The “Gold Drain” and Speculation 65 2. In Search of an ILLR 67 2.1. The General Arrangements to Borrow 68 3. An Alternative ILLR: Central Bank Currency Swaps 74 3.1. The Fed’s Novel Idea 75 3.2. Who Needs the IMF? 77 3.3. How the Swap Lines Protected US Interests 81 3.4. Why Did Europe Cooperate? 82 4. Conclusions 84 4. The Exchange Stabilization Fund and the IMF in the 1980s and 1990s 85 1. The Exchange Stabilization Fund 87 2. Global Banking and the Debt Crisis: 1980s 91 2.1. The IMF’s “Concerted Lending” Strategy and the Problem of Unresponsiveness 92 2.2. The ESF and “Bridge Loans”: Correcting for the Problem of IMF Unresponsiveness 97 3. Portfolio Flows and Capital Account Crises: 1990s 99 3.1. Capital Account Crises and IMF Resource Insufficiency 102 3.2. The ESF and Supplemental Loans: Correcting for the Problem of IMF Resource Insufficiency 104 4. Conclusions 105 5. Who’s In, Who’s Out, and Why? Selecting Whom to Bail Out, 1983–​1999 107 1. US Financial Interests and ESF Bailout Selection 109 2. An Empirical Model of ESF Bailout Selection 114 3. Results 120 4. Conclusions 124 6. US International Bailouts in the 1980s and 1990s 126 1. Case Selection 127 2. The Cases 129 2.1. Mexico, Brazil, and Argentina, 1982–​1983 129 2.2. Argentina, 1984 137 2.3. Poland, 1989 140 2.4. Mexico, 1995 142 2.5. Thailand, 1997 148 2.6. Indonesia and South Korea, 1997 150 2.7. Declining Use: The ESF Is Put Out to Pasture 156 3. Conclusions 158 7. The United States as an ILLR during the Great Panic of 2008–​2009 160 1. Background: “A Novel Aspect” of the Great Panic of 2008 162 2. US Financial Interests and the Fed’s ILLR Actions 169 3. An Empirical Model of Fed Swap Line Selection 176 4. The Interest-​Rate Threat and the Fed’s ILLR Actions 180 5. Transcript Analysis of FOMC Meetings 183 5.1. The Initiation of the Swap Lines and the TAF, August 2007–December 2007 184 5.2. Incremental Expansion of Liquidity Facilities, March 2008–​August 2008 188 5.3. Rapid Growth of the Swap Program: September 15, 2008–​October 28, 2008 189 5.4. Swap Lines for Four Emerging Markets: October 29, 2008 191 6. Conclusions 193 8. Conclusions 196 1. Contributions 197 2. The Future of the United States as an ILLR 200 3. Policy Implications 206 4. Final Thoughts 210 Appendix 212 Bibliography 218 Index 234 " When financial crises occur, economic theory maintains that national economies need a lender of last resort to stabilize markets. In today's financial system, crises are rarely confined to one country-they often go global. Yet, there is no formal international lender of last resort (ILLR) to perform this function for the world economy. Conventional wisdom says that the International Monetary Fund (IMF) has emerged as the de facto ILLR. However, that premise is incomplete. Brother, Can You Spare a Billion? explores how the United States has for decades regularly complemented the Fund's ILLR role by selectively providing billions of dollars in emergency loans to foreign economies in crisis. Why would U.S. policymakers ever put national financial resources at risk to "bail out" foreign governments and citizens to whom they are not beholden-especially when the IMF was created for this purpose? Daniel McDowell argues the United States has been compelled to provide such rescues unilaterally when it believes a multilateral response via the IMF is either too slow or too small to protect vital U.S. economic and financial interests. Interestingly, it does this despite the many advantages to allowing the IMF to take the lead. The United States never wanted to go into the international lending business, but in response to the IMF's chronic weaknesses, it intervenes to manage international economic crises before they can affect America's domestic economy. Through a combination of historical case studies and statistical analysis, McDowell uncovers the defensive motives behind U.S. decisions to provide global liquidity beginning in the 1960s, moving through international debt crises of the 1980s and emerging market currency crises of the 1990s, and extending up to the 2008 global financial crisis. Brother, Can You Spare a Billion? goes beyond conventional wisdom to paint a complete picture of how international financial crises have been managed and highlights the unique role that the United States has played in stabilizing the world economy in troubled times. "-- Provided by publisher When Financial Crises Occur, It Has Long Been Accepted That National Economies Need A Lender Of Last Resort To Stabilize Markets. In Today's Global Financial System, Crises Are Rarely Confined To One Country. Indeed, They Often Go Global. Yet, There Is No Formal International Lender Of Lastresort (illr) To Perform This Function For The World Economy. Conventional Wisdom Says That The International Monetary Fund (imf) Has Emerged As The De Facto Illr. Yet, That Premise Is Incomplete. Brother, Can You Spare A Billion? Explores How The United States Has For Decades Regularlycomplemented The Fund's Illr Role By Selectively Providing Billions Of Dollars In Emergency Loans To Foreign Economies In Crisis. Why Would U.s. Policymakers Ever Put National Financial Resources At Risk To Bailout Foreign Governments And Citizens To Whom They Are Not Beholden When The Imf Wascreated For This Purpose? Daniel Mcdowell Argues The United States Has Been Compelled To Provide Such Rescues Unilaterally When It Believes A Multilateral Response Via The Imf Is Either Too Slow Or Too Small To Protect Vital U.s. Economic And Financial Interests. Through A Combination Of Historical Case Studies And Statistical Analysis, Mcdowell Uncovers The Defensive Motives Behind U.s. Decisions To Provide Global Liquidity Beginning In The 1960s, Moving Through International Debt Crises Of The 1980s And Emerging Market Currency Crises Of The 1990s, Andextending Up To The 2008 Global Financial Crisis. Together, These Analyses Paint A More Complete Picture Of How International Financial Crises Have Been Managed And Highlight The Unique Role That The U.s. Has Played In Stabilizing The World Economy In Troubled Times. Conventional wisdom says that the International Monetary Fund (IMF) functions as the de facto international lender of last resort (ILLR) for the global financial system. However, that premise is incomplete. Brother, Can You Spare a Billion? explores how the U.S. has for decades regularly complemented the Fund's ILLR role by selectively providing billions of dollars in emergency loans to foreign economies in crisis. Why would the U.S. ever put national financial resources at risk to'bail out'foreign countries? McDowell argues that the U.S. has been compelled to provide such rescues unilaterally when it believes the IMF's multilateral response is too slow or too small to protect vital U.S. economic interests. Through a combination of historical case studies and statistical analysis, McDowell uncovers the defensive motives behind U.S. decisions to provide global liquidity from the 1960s through the 2008 global financial crisis. Moving beyond conventional wisdom, this book paints a complete picture of how international financial crises have been managed and highlights the unique role the U.S. has played in stabilizing the world economy in troubled times. "This book explores how and why the U.S. has regularly acted, often alongside the IMF, as an international lender of last resort by selectively bailing out foreign economies in crisis. It highlights the unique role that the U.S. has played in stabilizing the world economy from the 1960s through 2008"-- Provided by publisher