The International Monetary Fund was created at Bretton Woods in July of 1944, toward the end of WWII. It is one of two Bretton Woods Institutions along with the World Bank. U.S. President Roosevelt asked 44 different governments to attend the Bretton Woods conference so that they could draw up a plan to make sure that there would never be another Great Depression.
The below video shows delegates arriving at the resort in the White Mountains of New Hampshire.
Both Bretton Woods Institutions have a specific role in creating and maintaining the balance of economic power in the world. The IMF specifically focuses on stabilizing the world’s currencies and making sure there is cooperation among the world’s economies. These days, we hear about the IMF when it provides bailouts to countries that are in the midst of an economic crisis, such as Ireland and Greece. The IMF’s biggest borrowers, however, are Hungary, Romania and Ukraine.
Although the IMF is best known right now for providing a short-term crisis resolution, it also makes loans to countries that are not in the midst of a financial meltdown. Ultimately, the IMF is meant to oversee — and supervise — the most powerful economic countries and protect and provide guidance to those countries which are the most economically vulnerable.
So where does the IMF get all this money to give out hundreds of billions of dollars? Well, the “Fund”, as it is colloquially known, is comprised of 187 countries, and each one of these countries pays a due, or “quota,” that gets put into a collective fund. The IMF has $328 billion under its control that have been collected from these fees, as of August 31, 2010. Also as of that date, the IMF has made $200 billion worth of loans.
Just in September the IMF loaned $450 million to Pakistan. And, today, on December 8, it was announced that Macedonia is asking the IMF for a 480 million euro ($635 million) loan. Most recently, the IMF provided a 22.5 billion euro bailout loan to Ireland and a 30 billion euro bailout to Greece. As of August 2008 there was $18.3 billion of outstanding loans to 65 different countries.
In a sign of how much lending the IMF has been having to do of late, it sold 300 tons of gold in July of 2010. The IMF is the world’s third largest holder of gold. (The U.S. and Germany take spots one and two). It may only sell its gold if 85% of the voting member countries agree it should. Additionally, large sales of gold must be phased over a certain amount of time to avoid disrupting the gold market. Since its inception in 1944, the IMF has made six other key gold transactions, according to its website. Back in September of 2009, the sale of 403.3 tons of gold was approved — that’s an eighth of the Fund’s total gold holdings.
Although the IMF has 187 member countries, it is governed by the International Monetary and Financial Committee, which has just 24 countries on the board. Currently, members of the board are not elected, but Dominique Strauss-Kahn, the IMF’s managing director, said in a speech released today on December 8, 2010, that the board is moving to an all-elected one.
Next up: DSK 101
Stay tuned for more coverage of the IMF and Dominique Strauss-Kahn in a lead-up to the Reuters Newsmaker event with DSK next week on Thursday, December 16 at the Newseum in Washington, D.C.