I now understand it this way:

The IMF creates and allocates new SDR’s to its members.

There is no other source of SDR’s.

SDR’s exist only in accounts on the IMF’s books.

SDR’s have value only because there is an informal agreement between members that they will use their own currency to lend against or buy SDR’s from members the IMF deems in need of funding who also accept IMF terms and conditions.

Originally, in the fixed exchange rate system of that time, this was to help members with balance of payments deficits obtain foreign exchange to buy their own currencies to keep them from devaluation.

The system failed and now the exchange rates are floating.

Currently SDR’s and the IMF are used by members needing help with foreign currency funding needs.

Looks to me like Greece will be borrowing euro from other euro nations using its SDR’s as collateral or selling them to other euro nations.

Either way it’s functionally getting funding from the other euro members.

Greece is also accepting IMF terms and conditions.

The only way the US is involved is if a member attempts to use its SDR’s to obtain $US.

The US is bound only by this informal agreement to accept SDR’s as collateral for $US loans, or to buy SDR for $US.

SDR’s have no intrinsic value and are not accepted for tax payments.

It’s a lot like the regional ‘currencies’ like ‘lets’ and ‘Ithaca dollars’ that are also purely voluntary and facilitate unsecured lending of goods and services with no enforcement in the case of default.

It’s a purely voluntary arrangement which renders all funding as functionally unsecured.

There is no IMF balance sheet involved.

While conceptually/descriptively different than what I erroneously described in my previous post, it is all functionally the same- unsecured lending to Greece by the other euro nations with IMF terms and conditions.

The actual flow of funds and inherent risk is as I previously described.

No dollars leave the Fed, euro are transferred from euro members to Greece.

I apologize for the prior incorrect descriptive information and appreciate any further information anyone might have regarding the actual current arrangements.

Prior post:

I understand it this way:

The US buys SDR’s in dollars.
those dollars exist as deposits in the IMF’s account at the Fed.

The euro members buy SDR’s in euro.
Those euro sit in the IMF’s account at the ECB

The IMF then lends those euro to Greece
They get transferred by the ECB to the Bank of Greece’s account at the ECB.

The IMF’s dollars stay in the IMF’s account at the Fed.

They can only be transferred to another account at the Fed by the Fed.

U.S. taxpayers are helping finance Greek bailout

By Senator Jim DeMint

May 6 — The International Monetary Fund board has approved a $40 billion bailout for Greece, almost one year after the Senate rejected my amendment to prohibit the IMF from using U.S. taxpayer money to bailout foreign countries.

Congress didn‚t learn their lesson after the $700 billion failed bank bailout and let world leaders shake down U.S taxpayers for international bailout money at the G-20 conference in April 2009. G-20 Finance Ministers and Central Bank Governors asked the United States, the IMF‚s largest contributor, for a whopping $108 billion to rescue bankers around the world and the Obama Administration quickly obliged.
Rather than pass it as stand-alone legislation, President Obama asked Congress to fold the $108 billion into a war-spending bill to send money to our troops.

It was clear such an approach would simply repeat the expensive mistake of the failed Wall Street bailouts with banks in other nations. Think of it as an international TARP plan, another massive rescue package rushed through with little planning or debate. That‚s why I objected and offered an amendment to take it out of the war bill. But the Democrat Senate voted to keep the IMF bailout in the war spending bill. 64 senators voted for the bailout, 30 senators voted against it.

Only one year later, the IMF is sending nearly $40 billion to bailout Greece, the biggest bailout the IMF has ever enacted.

Right now, 17 percent of the IMF funding pool that the $40 billion bailout is being drawn from comes from U.S. taxpayers. If that ratio holds true, that means American taxpayers are paying for $6.8 billion of the Greek bailout. Although the $108 billion extra that Congress approved for the IMF in 2009 hasn‚t yet gone into effect, you can bet that once it does Greek bankers will come to the IMF again with their hat in hand. And, if other European Union countries see free money up for grabs they could ask the IMF for bailouts when they get into trouble, too. If we‚ve learned anything from the Wall Street bailouts it‚s that just one bailout is never enough.
To hide the bailout from Americans already angry with the $700 billion bank bailout, Congress classified it as an „expanded credit line.‰ The Congressional Budget Office only scored it as $5 billion because IMF agreed to give the United States a promissory note for the rest of the bill.
As the Wall Street Journal wrote at the time, „If it costs so little, why not make it $200 billion. Or a trillion? It‚s free!‰

Of course, money isn‚t free and there are member nations of the IMF that won‚t be in a hurry to pay it back. Three state sponsors of terrorism, Iran, Syria and Sudan, are a part of the IMF. Iran participates in the IMF‚s day-to-day activities as a member of its executive board.

If the failed bank bailout and stimulus bill wasn‚t enough to prove to Americans the kind of misguided, destructive spending that goes on in Washington this will: The Democrat Congress, aided by a few Republicans, used a war spending bill to send bailout money to an international fund that‚s partially-controlled by our enemies.

America can‚t afford to bail out foreign countries with borrowed dollars from China and certainly shouldn‚t allow state sponsors of terror a hand in that process.

This has to stop if we are going to survive as a nation. Congress won‚t act stop such foolishness on its own. The only way Americans can stop this is by sending new people to Washington in November who will.

Sen. Jim DeMint is a Republican U.S. Senator from South Carolina.