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Geithner May Back Lagarde at IMF (Bloomberg)

June 6, 2011

Nancy Birdsall was quoted in a Bloomberg article about selecting the new leader of the IMF.

From the article

U.S. Treasury Secretary Timothy F. Geithner says France’s Christine Lagarde and Mexico’s Agustin Carstens are both qualified to run the International Monetary Fund. He may have little choice but to support Lagarde.

Under an unwritten agreement that dates back to the end of World War II, the IMF has always been led by a European while the World Bank has been headed by an American. Backing a non- European for the IMF could mean relinquishing U.S. control of the World Bank -- an outcome members of Congress who decide on funding for development banks are not ready to contemplate.

“For the sake of influencing policy and lending, as well as maintaining congressional support, it is very important that the World Bank continue to be led by an American,” Representative Nita Lowey of New York, the top Democrat on the House Appropriations Committee panel that oversees foreign-aid spending, said in an e-mail. Congress has yet to approve the Treasury Department’s $3.4 billion international aid budget for next year, which includes funding for the World Bank.

“We would like to see the U.S. continue to play and have a leadership role in these institutions,” Representative Robert Dold, an Illinois Republican and vice chairman of the Financial Services Committee panel that oversees development banks, said in an interview.

The World Bank, headed by former U.S. Trade Representative Robert Zoellick, finances projects in developing nations, including $1.5 billion in loans to help improve India’s rural roads last year. The IMF provides emergency loans to countries in financial distress, committing about $105 billion in aid to Portugal, Greece and Ireland. The U.S. also controls the No. 2 job at the IMF, now held by John Lipsky, a former JPMorgan Chase & Co. executive.

‘Very Talented’

Geithner on May 25 said Lagarde, the French finance minister, and Mexican central bank Governor Carstens are both “very talented” candidates to replace Dominique Strauss-Kahn at the IMF. He also said the U.S., the fund’s largest shareholder with 17 percent, will play a “significant” role in choosing a successor to Strauss-Kahn, who resigned after his arrest on charges of attempted rape and sexual assault.

Strauss-Kahn pleaded not guilty to all seven charges today in Manhattan before New York State Supreme Court Justice Michael Obus. Obus scheduled the next hearing for July 18.

“Congress is certainly watching this election process very closely,” Tim Adams, a former Treasury undersecretary and now managing director at the Lindsey Group, an investment consulting firm based in Fairfax, Virginia, said in an interview. “They will want to ensure that the U.S. representation at both the fund and the bank remain at its current levels.”

Lipsky’s position will also be up for grabs when his term as first deputy managing director ends in August, and the U.S. will probably get a guarantee from Europeans to keep the No. 2 post if Lagarde gets the top job, said Nancy Birdsall, president of the Washington-based Center for Global Development, an aid research group.

Read it Here.

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Senior Fellow, President Emeritus