Scandal at the IMF: What Happens Now?

Written on May 16, 2011 by Ángeles Figueroa-Alcorta in International Law & Organizations, Political Economy

IMF Scandal: Meet the Man Who Takes Over the Fund
By David Bosco 

John Lipsky, First Deputy Managing Director at IMF

 With IMF managing director Dominique Strauss-Kahn under arrest in New York on sexual assault charges, the Fund announced that the French politician’s deputy, American John Lipsky, would take over day-to-day operations. He is scheduled to brief the IMF board on developments this afternoon. Strauss-Kahn was widely expected to depart this summer to run for the French presidency, but the arrest has robbed the Fund of an orderly process for selecting a new director. 

Lipsky’s tenure at the top may last only as long as it takes for a consensus candidate to emerge. Indeed last week, he had announced his intention to step down in August, when his term as principal deputy is scheduled to end. That exit will likely be postponed. Lipsky steps in with a wealth of experience–and a profile very different from that of the charismatic and free-wheeling Strauss-Kahn.

Lipsky was a banker for most of his career, and he still looks the part. He’s tall and lean, sports a mustache that curls slightly, and favors pinstripes. For years, he worked at Salomon Brothers and J.P. Morgan, although he also served a stint as a junior official at the Fund in the 1980s.  He’s a PhD. economist and talks like one.  Within the first few moments of an interview he granted me earlier this year, he distinguished between Pareto superiority and Pareto optimality.

Since 2006, Lipsky has been the second-ranking official at the Fund, a position which has placed him at the epicenter of the financial crisis and its aftermath. Lipsky arrived at the Fund shortly before Strauss-Kahn was selected as managing director (the top IMF post has always gone to a European), and their styles could scarcely be more different. Strauss-Kahn is a politician who speaks off-the-cuff and in layman’s terms. For all his personal travils, which predate this latest charge, he has been widely seen as one of the most politically savvy directors in the Fund’s history.  Lipsky, by contrast, is an economist and a technocrat whose utterances are almost invariably cautious and precise. No one would characterize him as a politician.

That technocratic style has often been an asset, and may be critical as Lipsky tries to steer the Fund through one of its more difficult moments. In Washington and around the world, Lipsky has often led delicate negotiations between the Fund and those countries seeking its resources, either in the form of loans to address emergency shortfalls or stand-by arrangements to help reassure international markets.  Just this month, he announced a new credit line for Colombia, tamped down rumors that Greece might default on its debt, and warned Tanzania about the dangers of inflation. Read more…

As published in www.foreignpolicy.com on May 15, 2011.

David Bosco is a contributing editor at Foreign Policy and the author of Five to Rule Them All: the UN Security Council and the Making of the Modern World, a history of the world’s most elite club. He is an assistant professor at American University’s School of International Service and was a senior editor at FP from 2004-2006. Bosco has followed international organizations closely from several different perspectives. He has reported from Afghanistan and Kosovo on NATO operations, written about the International Criminal Court, and worked for a United Nations project in Bosnia. His work has appeared in the Washington Post, Slate, FP, the Los Angeles Times, the New York Times Book Review and other publications.


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