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

249 Pages·2017·12.716 MB·English

by  McDowell, Daniel

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Brother, Can You Spare a Billion?
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Brother, Can You
Spare a Billion?
The United States, the IMF,
and the International Lender
of Last Resort
Daniel McDowell
Maxwell School of Citizenship and
Public Affairs
Syracuse University
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ISBN 978–0 –1 9–0 60576–6
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Printed by Sheridan Books, Inc., United States of America
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For Sara Lu. We did it.
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CONTENTS
Figures xi
Tables xiii
Preface xv
Abbreviations xix
1. Introduction 1
1. The Puzzle 3
2. The Argument 7
3. Plan of the Book and Findings 11
2. The ILLR in Theory and Practice 18
1. An International LLR: A Brief History of a Concept 19
1.1. The ILLR and the Hegemon 20
1.2. The ILLR and the IMF 22
2. The IMF’s Limitations as ILLR 24
2.1. The Problem of Unresponsiveness 25
2.2. The Problem of Resource Insufficiency 27
3. The United States’ ILLR Mechanisms 30
3.1. The Mechanics of Currency Swaps 31
3.2. Speed and Independence 31
3.3. Lending Capacity 33
3.4. Division of Labor 37
4. Conclusions 40
3. The United States Invents Its Own ILLR, 1961– 1962 41
1. More Dollars, More Problems 42
1.1. From Dollar Gap to Dollar Glut 43
1.2. Two Threats: The “Gold Drain” and Speculation 44
2. In Search of an ILLR 46
2.1. The General Arrangements to Borrow 47
3. An Alternative ILLR: Central Bank Currency Swaps 53
3.1. The Fed’s Novel Idea 54
3.2. Who Needs the IMF? 56
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( viii ) Contents
3.3. How the Swap Lines Protected US Interests 60
3.4. Why Did Europe Cooperate? 61
4. Conclusions 63
4. The Exchange Stabilization Fund and the IMF in the 1980s
and 1990s 64
1. The Exchange Stabilization Fund 66
2. Global Banking and the Debt Crisis: 1980s 70
2.1. The IMF’s “Concerted Lending” Strategy and the Problem
of Unresponsiveness 71
2.2. The ESF and “Bridge Loans”: Correcting for the Problem
of IMF Unresponsiveness 76
3. Portfolio Flows and Capital Account Crises: 1990s 78
3.1. Capital Account Crises and IMF Resource
Insufficiency 81
3.2. The ESF and Supplemental Loans: Correcting for the
Problem of IMF Resource Insufficiency 83
4. Conclusions 84
5. Who’s In, Who’s Out, and Why? Selecting Whom to Bail Out,
1983– 1999 86
1. US Financial Interests and ESF Bailout Selection 88
2. An Empirical Model of ESF Bailout Selection 93
3. Results 99
4. Conclusions 103
6. US International Bailouts in the 1980s and 1990s 105
1. Case Selection 106
2. The Cases 108
2.1. Mexico, Brazil, and Argentina, 1982– 1983 108
2.2. Argentina, 1984 116
2.3. Poland, 1989 119
2.4. Mexico, 1995 121
2.5. Thailand, 1997 127
2.6. Indonesia and South Korea, 1997 129
2.7. Declining Use: The ESF Is Put Out to Pasture 135
3. Conclusions 137
7. The United States as an ILLR during the Great Panic
of 2008– 2009 139
1. Background: “A Novel Aspect” of the Great Panic
of 2008 141
2. US Financial Interests and the Fed’s ILLR Actions 148
3. An Empirical Model of Fed Swap Line Selection 155
4. The Interest-R ate Threat and the Fed’s ILLR Actions 159
5. Transcript Analysis of FOMC Meetings 162
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Contents ( ix )
5.1. The Initiation of the Swap Lines and the TAF, August
2007–December 2007 163
5.2. Incremental Expansion of Liquidity Facilities, March
2008–A ugust 2008 167
5.3. Rapid Growth of the Swap Program: September 15,
2008– October 28, 2008 168
5.4. Swap Lines for Four Emerging Markets: October 29,
2008 170
6. Conclusions 172
8. Conclusions 175
1. Contributions 176
2. The Future of the United States as an ILLR 179
3. Policy Implications 185
4. Final Thoughts 189
Appendix 191
Bibliography 197
Index 213