The IMF has fallen on rough times in the past few years not because of its own failure, subprime loans or mismanagement from executives, but from the success of its former customers. Big countries like Brazil and Venezuela have sworn off IMF loans vowing never again to get entangled with the foreign “lender of last resort.” What created this resentment from nations going to the IMF for cash was the same sort of stipulations that the Treasury is imposing on banks taking part in the $250B bail out. The Wall Street Journal reports that IMF loaned only $2B last year dramatically down from the $32B in 1998. Because of its lack of activity, there has even been talk of dismantling the IMF and allowing its member countries to seek other sources of capital if needed.
While the high price of oil, coal and other commodities have freed debtor nations from the IMF’s grasp, the recent downward spiral of the global economy has forced some of nations back to the table. Pakistan has been in discussion with IMF officials over a possible loan in the neighborhood of $5B. At least now we know where Hank Paulson got his template for the TARP program.
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