Rumors swirled this morning that the IMF was preparing a monster-sized loan for Italy in case their debt crisis spirals further into chaos, but a closer look reveals this rumor might not have any legs.
Italian news organization La Stampa first reported the IMF is readying a $794 billion loan for Italy if new Prime Minister Mario Monti couldn't implement financial reforms without having to refinance the country's debt. Should his plans fail to stabilize speculation on Italy's debt, Monti would be given access to the IMF loan. It would act as a security blanket, essentially.
Finance blogger Tyler Durden (a pseudonym), of Zero Hedge, says the IMF doesn't have that kind of money to give out in a loan in the first place. They'd have to ask the U.S. Congress for an expansion of their funding in order for it to pass. Durden explains:
any changes to the IMF, which currently is massively underfunded... have to go through US Congress when it comes to expanding funding capacity. Yup, the most dysfunctional, corrupt and criminal thing in the world - the US House of Representatives, where unless everyone is short Italian CDS, this will never pass. In other words: this rumor is dead in the water.
This article is from the archive of our partner The Wire.