Felix Salmon

France’s banks lose their Street cred

Felix Salmon
Sep 13, 2011 16:02 UTC

It’s looking increasingly as though the proximate cause of the next big global crisis is going to be a liquidity crunch at French banks, rather than a European sovereign default. This is not the kind of stock chart that any leveraged institution likes to see:


BNP Paribas started July trading at €55 per share; it’s now at €27, and there’s no bottom in sight. And that’s making lenders very nervous, according to Nicolas Lecaussin.

“We can no longer borrow dollars. U.S. money-market funds are not lending to us anymore,” a bank executive for BNP Paribas, who declines to be named, told me last week. “Since we don’t have access to dollars anymore, we’re creating a market in euros. This is a first. . . . we hope it will work, otherwise the downward spiral will be hell.”

And Andrew Ross Sorkin, today, points out that Christine Lagarde, after being forthright about the need for European bank capitalizations, has recently been, well, less so. Banks live or die on confidence, and it helps no one if the managing director of the IMF does anything to erode that confidence during a liquidity panic. Largarde’s right that European banks in general — and French banks in particular — need to be recapitalized. But now is not the time to be saying such things, just because statements along those lines, in today’s febrile environment, can cause banks to collapse even before new capital is lined up.

It should go without saying that the banks themselves have to be upfront about the current situation. This kind of thing only makes matters much worse, since it causes markets to discount everything they say:

In the opinion of BNP Paribas, the largest French bank, the market for Greek bonds is inactive, never mind the fact that there are trades every day. It pointed to “the lack of liquidity seen during the first half of 2011” as it concluded market prices were “no longer representative of fair value.” It is now using a model to determine value…

Many banks applied a haircut to all of their Greek bonds, including the long-term ones not covered by the proposed exchange. But some banks, including BNP Paribas and Société Générale in France and Intesa Sanpaolo in Italy, decided to carry the long-term bonds at full value, on the theory that it would all work out and that European governments had promised not to force exchanges of longer-dated bonds…

On Thursday, the average trading price for such bonds was about 37 percent of par value.

The market has good reason to be worried about the French banks. They own $57 billion in Greek sovereign and private debt — more than all German and British banks combined. And they have well over half a trillion euros in Spanish and Italian debt, most of which is trading at a substantial discount to par, if it trades at all.

As a result, the only way for the French banks to be able to project a credible degree of solvency is for the Eurozone to inject a huge amount of money somewhere. Either it goes into the countries the French banks have lent to, and will then be used to pay back the French banks what they’re owed, or else it just goes into the French banks directly — the TARP solution. But if the EFSF isn’t beefed up and deployed very soon, we could see some extremely big French banks either collapse or get nationalized in very short order. And nobody wants to see where the chain reaction from that would lead.


The future looks bleak for French banks. The same applies to Spanish and (don’t forget) German banks. Nobody has to be hugely sorry for France and Germany taking a hit from Greece’ default: by sabotaging the Stability Pact they played a very important part in allowing Greece and Italy to take the rest of Europe for a ride.

How come, by the way, that the French banks are so loaded with Greek, Spanish and Italian debt? Could it be that our boys were doing some pretty heavy betting? 560 billion! Now trading at 40%-50%, wouldn’t it mean that French banks already are 250 billion euro down?

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Lagarde’s employment contract

Felix Salmon
Jul 6, 2011 13:24 UTC

The IMF, quite rightly, is putting a tough ethics clause into Christine Lagarde’s employment contract:

Her terms of employment were made public as she arrived at the International Monetary Fund’s Washington headquarters…

Lagarde’s contract holds her to “highest standards of ethical conduct consistent with the values of integrity, impartiality and discretion.”

It also requires her to avoid “even the appearance of impropriety.” Further, it states that “in the performance of your duties as managing director, you have an exclusive duty of loyalty to the fund and shall avoid any conflict of interest or the appearance of such a conflict.”

This is all welcome stuff, although it could conceivably cause a kerfuffle if the French Court of Justice breaks against her in its investigation over her involvement in a dispute involving Bernard Tapie.

But what does it mean, exactly, to say that Lagarde’s “terms of employment were made public”? I spent a bunch of time burrowing around the IMF website this morning trying to find them, without success. Eventually the Guardian came along to solve the problem: its article on Lagarde’s contract links the phrase “terms of appointment” here.

As you might expect when a URL has the term “protected” in it not once but twice, clicking on that link will get you just as far as a big green box with a padlock on it and the words “secure area” in all caps.

I do understand why it makes sense for the IMF to have a secure media briefing center apart from the press-release area on its website: such things come in handy for embargoed content, and the IMF releases a lot of that. But there’s no reason why Lagarde’s terms of employment should have been embargoed, and even if there was, there’s no reason for them still to be missing from the main IMF website.

This isn’t in itself an ethics issue — it’s a transparency issue, which is related but not identical. I do think that the IMF and the World Bank tend to be a bit sheepish about their pay levels, not least because if you’re not a US citizen, all that money — $467,940 a year, in Lagarde’s case, plus an allowance of $84,000 — comes to you tax-free.

Lagarde was almost certainly earning more, even on an after-tax basis, when she was at Baker & McKenzie, but she’s still being paid substantially more than any elected head of state in the world. If the job of IMF managing director is a public-service one, one wonders why her salary needs to be so high.


The per diem and the expense account are intended
“to enable you to maintain, in the interests of the Fund, a scale of living appropriate to your position as Managing Director and to the Fund’s need for representation.”

It sounds like the logic that was used in pre-revolutionary France that demanded that a nobleman spend lavishly to maintain a life style befitting his rank. In other words, compulsory conspicuous consumption is part of her job description.

If Ms. Lagarde is expected to live in a gilded cage does that also imply that the IMF expects those who don’t occupy such lofty and specialized positions to retreat to garbage cans and filth as appropriate for their low value in society?

Those conditions make that tight fisted Hattie Green of Wall Street lore look like she was no nonsense and all business by comparison. I suppose no one love’s Warren Buffet’s choice of modest living standards anymore? He was always fighting a head wind.

It is obvious that modern society cannot make up it’s mind about what it expects from wealth or poverty but I’ve never heard of a built in dress for success clause. I always thought it was assumed.

As a self employed person I don’t need a lavish dress code as part of my job description and so many would like those allowance to maintain appearances – my sister for one, who is a glutton for money , that I wonder if it is usually a part of corporate contracts in general?

It seems a surprising allowance among other allowances, for a person who is otherwise taking a position that recently was nearly anonymous. It also stinks that people in her position are being paid to set lifestyle standards that so many others will ape yet can’t afford. That’s been a constant complaint in these comment pages for the past few years.

You can drape a rattle trap in brocade and it will still eventually collapse from it’s own slipshod carpentry.

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Why Lagarde got the IMF job today

Felix Salmon
Jun 28, 2011 22:21 UTC

For me the interesting thing about Christine Lagarde becoming the new managing director of the IMF is not the news itself. I said she’d get the job as long ago as May 15, and I’ve considered her a lock since May 20. Rather, the interesting thing for me is the timing: everybody expected the announcement on Thursday, the 30th, but instead it came today, the 28th. Why push things up?

Because in the fraught negotiations with Greece, every day counts — the IMF disbursement was originally due tomorrow, the 29th, and can’t wait much longer than that before Greek debt maturities in July start piling up and forcing a default. And the headless IMF, it turns out, has not been an effective actor in those negotiations. Here’s Mohamed El-Erian, an old IMF hand:

The post of managing director is not to be taken lightly in an institution that operates like a well-disciplined army, with staff looking up to the unquestioned general for decisive leadership.

This is why the resignation of Dominique Strauss-Kahn has been so disruptive to the functioning of the IMF.

With Lagarde now moving swiftly from an international campaign to actual management of the Fund, the world’s technocrats will all be hoping that she will prove a forceful and decisive leader on the urgent subject of Greece. The Greeks have a certain amount of freedom here, since it’s pretty much unthinkable that Lagarde’s first act would not be to disburse bailout funds. But one sign of a leader is getting results even when your actions are severely constrained. Lagarde has an immediate opportunity to prove herself, and it’s absolutely in Greece’s long-term interest to make her look tough and effective. She might well put these extra two days to very good use.


Not really true: June 30 was the end-deadline set from the beginning by the board, but the announcement has been expected on June 28 for at least a week. And CL won’t be in the chair until Tuesday next week, so it’s not as if two days this week made much difference.

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Why Fischer’s IMF candidacy is a non-starter

Felix Salmon
Jun 13, 2011 06:11 UTC

Stan Fischer’s quixotic decision to throw his hat into the ring as a candidate for managing director of the IMF has been lauded by Mohamed El-Erian, who reckons that “he would likely prevail in an open, transparent and merit-based selection process.” Insofar as this is true, it’s a bit depressing.

I’m no great partisan for Christine Lagarde, whose main qualification for the job is that she’s French. But she’s smart, she’s tough, she’s an able politician — as the latest endorsements of her candidacy attest — and she has the ear of the European heads of state who are going to be forced to make some very tough decisions during her inevitable tenure at the Fund.

The job of IMF managing director is a particularly tough one. Everybody else at the Fund can kid themselves that they’re working for the managing director — the boss. But the managing director himself works for a fractious and highly opinionated board of directors which can be counted on to micromanage and second-guess every important decision. As such, the main skill needed in a managing director is to be able to manage those delicate relationships with great finesse, while at the same time projecting enough power and authority that any interference is kept to a minimum in the first place. It also helps to be respected by key heads of state, who ultimately direct the board.

This is where Fischer’s interview with the WSJ is revealing, and not in a particularly flattering way. Remember, here, that Fischer was number two at the IMF during the Asian financial crisis:

“There are serious economic issues” that need to be addressed, Mr. Fischer said, and IMF staffers often offer conflicting advice. “Without having that [economic] training, it’s very hard to know who’s right and who’s wrong,” he said…

Since the global financial crisis of 2008, the IMF has eased up on some of the requirements it once imposed on countries that accept emergency loans. Mr. Fischer said he approved of those changes and had tried to do something similar when he was at the IMF a decade ago but couldn’t win sufficient support from the IMF’s board.

This is the view of someone who sees the biggest issues facing the IMF managing director to be technocratic, rather than political. I have no doubt that Fischer is better at adjudicating economic questions than Lagarde — this is the man, remember, who co-authored a hugely respected economics textbook (now in its 11th edition) with none other than Rudi Dornbusch. But Fischer by his own admission is bad at winning support from the board. Either that, or in fact he was perfectly happy with the IMF’s economic orthodoxies in 1998-9. Which is quite likely, given that he quite literally wrote the book when it comes to economic orthodoxy. I remember those days reasonably well, and I certainly didn’t get any impression from Fischer at the time that he had any issues at all with the policies he was espousing.

One other thing is worth remembering about Fischer’s role as first deputy managing director: the job is always held by an American, and he got the job by dint of his US citizenship. It’s therefore a little rich for him to turn around and start complaining that he’s up against the very same set of conventions which allowed him that job in the first place.

It’s also worth remembering, while we’re on the subject of failed economic orthodoxies of the recent past, that Fischer spent three years, from 2002 to 2005, at Citigroup, working very closely with Bob Rubin. Indeed, he’s the only person I can think of who actually formally reported to Rubin, whose reputation has been comprehensively demolished by the financial crisis. As the co-author of an incredibly lucrative economics textbook, Fischer didn’t need the money; it’s fair to say that he saw no particular problem with taking the contacts he built up over a long public-sector career and turning them into profits for Citi shareholders, just so long as he got paid millions of dollars for doing so.

My feeling about Fischer is that he would be a managing director not dissimilar to the French technocrats who ran the shop during the 80s and 90s, Jacques de Larosière and Michel Camdessus. He’s not an agent of change; he’s a throwback to the past. And although he claims to be “full of vigor” at the age of 67, he’s probably a one-term MD at best, in an institution which has had altogether too much turnover in that role since Camdessus stepped down in 2000.

Of course it is high time that a non-European became managing director of the IMF. But Fischer is not the kind of break with tradition that the Fund needs — by non-European nobody means American, and Fischer would have a very hard time trying to present himself as an African, even if he was born in what is now Zambia.

So when Lagarde inevitably gets the job, let’s not shed too many tears that Fischer didn’t get it instead. In some kind of technocratic utopia, he’d be perfect. But in the messy real world, with his age and his US citizenship and his Citigroup years and his actions during the Asian financial crisis all counting against him, his candidacy is a non-starter. I’d be surprised if anyone at all, bar Israel, ended up voting for him.


Foppe, you probably don’t care because like your post on GS you are too stupid to understand what you are talking about and presumably are cutting and pasting from some other idiot.

Taiwan did not go to the IMF and was barely affected by the asian crisis. Maybe you are confusing them with Thailand? Both begin with T right? Singapore also did not need to go to the IMF because both these countries unlike Korea and Thailand and Indonesia were not doing a carry trade. Dumbass.

hariknaidu, I assume you’d prefer someone from Syria or Libya? Would be a nice follow-on compliment after their presidency of the UN Human Rights Council

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Lagarde, Juncker, and Greece’s solvency

Felix Salmon
May 26, 2011 17:10 UTC

Christine Lagarde’s international campaign to become the next head of the IMF is an attempt to maximize her credentials as the choice not only of Europe but of the rest of the world as well. The job is hers, at this point: once the US falls in behind Lagarde there’s no question that Lagarde will get the job, and with Hillary Clinton now waxing enthusiastic about how “we welcome women who are well qualified and experienced to head major organizations such as the IMF”, it’s going to be hard for the US to support anybody else. So Lagarde’s latest world tour should be seen as maneuvering to make her life as easy as possible when it comes to dealing with increasingly-powerful shareholders such as China and Brazil, after she starts in her new role.

Meanwhile, Jean-Claude Juncker, who chairs meetings of euro zone finance ministers, took it upon himself to come out in public and say just how bad the Greece situation has become. The key date we’re counting down to is June 29 — that’s the day on which the IMF is due to disburse its next tranche of aid to Greece. But before that can happen, the “troika” — the IMF, the ECB, and the EU — have to agree that all of Greece’s funding needs for the next 12 months have been covered or guaranteed by someone. Which they haven’t. “I don’t think that the troika will come to this result,” said Juncker.

If the IMF doesn’t come up with the money, Greece is in real trouble:

“If the Europeans have to acknowledge that the disbursement from the IMF on 29 June cannot be operationally implemented, then the expectation of the IMF is that the Europeans would step in for the IMF and take upon themselves the IMF’s portion of the financing,” Juncker said.

“That won’t work, because in certain parliaments — Germany, Finland and the Netherlands and others too — there is no preparedness to do so,” he said.

Why is Juncker saying this? Neil Hume quotes David Mackie of JP Morgan, who reckons that Juncker is twisting the arms of various Eurocrats to ensure that Greece gets access to the European Financial Stability Fund sooner rather than later. If EFSF terms get agreed before June 29, then that’s exactly the guarantee that the IMF is looking for, and the IMF’s funds can get disbursed.

But there’s another possibility: maybe Juncker is pressuring the euro zone to install Lagarde as IMF managing director before June 29. Lagarde has “earned a reputation as the most uncompromising opponent of a Greek debt restructuring among euro zone ministers,” according to Daniel Flynn, and it’s pretty much impossible to imagine that her very first act as managing director would be to throw the euro zone into crisis by denying Greece its scheduled tranche of IMF aid. After all, the tougher that the IMF becomes on conditionality, the more likely a Greek restructuring becomes.

The deadline for installing a new managing director at the IMF is June 30; I’m sure that a lot of Europe would like to see Lagarde get the job a few days earlier than that. And so maybe that’s what Lagarde’s jet-setting is all about: shoring up enough global support that she can sail through the nomination process very quickly. The G20 countries will be asking her about a possible double standard: why should the IMF be generous to Greece, when it’s been so tough on many other countries in the past? Lagarde, I imagine, will give an answer along the lines of Daniel Davies’s comment here:

The purpose of defaulting on the debt would be to improve Greece’s access to credit? And by putting its deficit funding at the caprice of international capital markets rather than other EU governments, Greece gains political independence? I suppose it is the land of the Pyrrhic victory, but even so; I am unconvinced that gaining the sort of freedom to set its own fiscal policy enjoyed by, say, Ecuador is really worth all that much.

btw, I don’t really know what the difference is between a liquidity problem and a solvency problem in this context, and I don’t believe anyone else does either.

What Davies misses here is the distinction that the markets make between ability to pay and willingness to pay. Once a country has defaulted on its debt, its ability to pay on new debts naturally goes up — it becomes more creditworthy, not less. But just as your credit score goes down rather than up after you declare bankruptcy, so do the markets tend to punish countries which have recently defaulted, on the grounds that if a country is prone to default, it’s not a good idea to lend to that country.

In the case of Greece, the markets would be utterly unconvinced by a “soft restructuring” which left the country’s debt-to-GDP ratios looking unsustainably large for the foreseeable future, and which kept alive the risk of a second restructuring — or even devaluation — down the road. And there’s no realistic chance of a coercive “hard restructuring” which would involve outright default on existing debt — not in the next year or so, anyway.

But still, I do think that there’s a difference between a liquidity problem and a solvency problem in Greece. The solvency problem has been apparent ever since this Greek government came into power and came clean on the country’s finances; the liquidity problem is the kind of thing which Juncker is talking about. Defaults are generally caused by liquidity issues rather than solvency issues, which is why Greek bond yields are so much higher now than they were at the beginning of 2010. But solvency is still important, and Lagarde faces a stark choice the minute that she becomes head of the IMF.

Either Lagarde will attempt to persuade both her shareholders and the markets that Greece’s debt burden is actually sustainable, or else she’ll have a Nixon-in-China moment and announce that in order to bring Greek debt down to a manageable level, there will need to be a broad restructuring of its liabilities. My guess is that by the time she’s finished her current tour, Lagarde will have a very clear idea of whether Plan A — the muddle-through-and-hope approach — has any chance of success at all. And if I were the Chinese, or the Brazilians, or the South Africans, I’d be trying to impress upon her in the starkest possible terms that it doesn’t. It’s not the job of the IMF to facilitate a state of denial in Europe and Greece. Indeed, that’s one reason why I’m uncomfortable with Lagarde getting the job in the first place. Despite the fact that she seems certain to get it.


Whether or not Greece has any realistic hope of paying the rest of Europe back has a direct bearing on whether the rest of Europe will want to keep bailing out Greece’s creditors at par – i.e., financing Greece. That’s what we are adding.

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The fraught politics facing Lagarde

Felix Salmon
May 24, 2011 19:52 UTC

To get an idea of the job facing the new head of the IMF, check out Patrick Wintour’s interview with Vince Cable, a UK cabinet minister who, perfectly sensibly, says that Greece is going to have to restructure its debts. Cable puts a positive spin on the idea: a “soft restructuring”, he says, with Greece staying in the euro zone, could lead to a closer political union.

Then, read the story of what happens when you so much as suggest such a thing to Jean-Claude Trichet, eurocrat-in-chief. Even if you’re from Luxembourg:

Jean-Claude Trichet, ECB president, walked out of a meeting hosted by Jean-Claude Juncker, Luxembourg’s prime minister. According to people familiar with events at the meeting, Mr Trichet was angry at talk of a so-called “soft” restructuring that could involve an extension of Greek debt maturities.

I can see why Trichet is so opposed to such a policy. Central banks, by their nature, hate restructuring assets: granting debt forgiveness is fiscal policy, not monetary policy. But the ECB holds a lot of Greek debt, and it’s almost impossible to see how it could fob that debt off onto the European Financial Stability Facility or any other body in advance of any restructuring.

In any event, the politics here are extremely delicate — note that Cable’s view is still just Cable’s view, rather than being the official view of the UK government — and the managing director of the IMF is the key broker who can forge some kind of consensus on this fraught subject both within Europe and more globally.

That’s why Pierre Briançon is wrong when he complains of Christine Lagarde that she isn’t qualified for the job:

Lagarde, who has no academic training in economics or finance, doesn’t even seem to have a strong set of beliefs.

Right now, a strong set of beliefs is something we don’t want in an IMF managing director. The job involves delicate negotiations with very large egos: it requires toughness, to be sure, but certainly not ideology. In that respect, the fact that it’s impossible to place Lagarde into an ideological hole is a big point in her favor — as is the fact that she seems to get on very well with the likes of Angela Merkel as well as her compatriot Jean-Claude Trichet.

Besides, “no academic training in economics or finance” doesn’t sound so bad to me, given the alternative.


Felix should read Simon Johnson on why Lagarde is not such a fine choice:

http://economix.blogs.nytimes.com/2011/0 5/26/the-problem-with-christine-lagarde/

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Why Lagarde needs a full term in office

Felix Salmon
May 20, 2011 16:00 UTC

Would Mohamed El-Erian have moved from Harvard to Pimco in 2007 if he was only offered the job for less than 18 months, at which point he would have to reapply for his job under a different system? Because that’s the offer that El-Erian thinks the IMF should make to Christine Lagarde:

Instead of a new five-year term, Lagarde should be appointed just to complete Strauss-Kahn’s term that runs until 2012. During this period, Lagarde would be charged to lead the IMF’s Executive Board to put in place a selection process that is open to all nationalities, transparent and merit-based — or the minimum standard of governance for an institution that is owned by 187 member countries and charged to serve them under the principle of “uniformity of treatment.”

Of course, come next year, Lagarde would be eligible to stand for a full term in an election that is open to all; and one that is based on merit rather than misplaced notions of national prestige and harmful political horse-trading. 

If my assessment of her qualifications is correct, she would be well placed to secure the necessary global support under a process that is credible and long, long overdue.

I can see where El-Erian is coming from here, but this idea would hobble Lagarde’s effectiveness from day one, making her something of a lame duck even before she formally started. Yes, there would be a good chance that she would get a proper five-year term starting in 2012. But right now the IMF needs all the leadership it can get, and having a managing director serving out a deliberately-truncated term, as though she was just filling in for DSK rather than taking over in her own right, would not help in that regard.

If Lagarde is like previous European IMF MDs, she’ll pay lip service to the idea of implementing a transparent and merit-based selection process, but won’t actually do anything about it. That’s why El-Erian wants to force the issue now. But realistically, change on this front can only come from the Europeans themselves, probably in conjunction with a US decision that it would be willing to give up the top job at the World Bank. That will take a lot of delicate jostling and international negotiation. It’s not something which can be pushed through in the space of a week or two while the IMF is leaderless.


With El-Erian’s approach, it would be a lot more efficient to vet the IMF deputy to the chief position, rather than go through the entire process of nominating candidates for these short spells. Look at the recent history of the IMF leadership – the last 3 leaders did not fulfill their 5 year terms. If we had a system whereby the replacements merely filled in the old director’s shoes for the remainder of their term, we’d have ended up with a higher turnover, and consequently a less stable organization.

El-Erian’s proposal would only really be logical if the deputy was being promoted to the IMF leadership – that would provide the right balance of fairness and stability. It doesn’t make sense though given the existing election process.

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Lagarde: it’s a lock

Felix Salmon
May 20, 2011 14:47 UTC

Christine Lagarde is going to be the next managing director of the IMF. European consensus is clearly coalescing around her: she has been endorsed by Germany, France, Italy, and the UK, not to mention Jean-Claude Juncker, who chairs the euro zone finance ministers. And the only other front-runner for the job, Kemal Dervis, has now ruled himself out after the NYT published an article about an extramarital affair he had many years ago. (The woman, I understand, still works at the IMF.)

The only thing standing in Lagarde’s way at this point is a French public prosecutor and the ongoing investigation into whether she abused her authority by pushing for an arbitration settlement in a case involving Bernard Tapie. We don’t yet know whether she will face a full inquiry — and we won’t know that until mid-June, which is far too late to decide on a nominee for the IMF job.

The past three IMF managing directors — Horst Köhler, Rodrigo de Rato, and Dominique Strauss-Kahn — have all failed to finish their five-year term in the job, leaving unexpectedly for various reasons. It’s pretty important that the next person in the role not suffer the same fate.

But it’s even more important, in the eyes of the Europeans, that they nominate a consensus candidate and push that person through. At this point Lagarde is the consensus candidate; it seems inconceivable that the consensus could shift to someone else in a short space of time. So while the Belgians and others might have misgivings about nominating someone who’s under a legal cloud, that’s not going to be enough to prevent Lagarde’s nomination.


You assume, unjustifiably, the candidate ultimately selected will be European.

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No change in how the IMF picks its leader

Felix Salmon
May 19, 2011 20:07 UTC

The IMF has released a one-page factsheet on the selection process for its top job, which is not very easy to understand. But the main message is reasonably clear: we have a process for choosing the managing director which we’ve followed in the past, and we’re not going to make any indication that the process will be any different this time around.

There are basically two ways that the managing director can be chosen. There’s the smoke-filled-room approach which has always been used in the past, and which will, it seems, be used this time too. Here’s how the IMF describes it:

An Executive Director may submit a nomination for the position. When more than one candidate is nominated, as has been the case in recent years, the Executive Board aims to reach a decision by consensus.

Alternatively, there could be a more qualifications-driven approach, as suggested by Mohamed El-Erian, with “an internationally balanced committee” evaluating applicants based on qualifications alone (rather than nationality), and putting forward two or three finalists for the board to vote on, based on the same criteria.

The official criteria make no mention of nationality, of course — but they don’t need to. Since we’re now officially using the same process that was in place in 2007, it’s reasonable to assume that the same kind of candidate is going to win. In other words, Christine Lagarde — who has all of DSK’s qualifications, plus the added bonus of being a woman. Maybe next time we’ll have a transparent selection process. This time it’ll be business as usual.