Bretton Woods Committee Article on the new US Congress

We fully covered the 2010 IMF reform package here on this blog in 2014. Now we move into 2015 with a new more Republican oriented Congress. We suggested here that this will make approval of the IMF reforms less likely. In this article by Scott Morris of the Bretton Woods Committee, he talks about this issue and implores the new Congress to pass the reforms.  Some quotes from this article and then a few comments. Please read the full article to get full context.

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"The United States has enjoyed the privileged position of largest shareholder and donor at the World Bank and IMF since the institutions’ founding seventy years ago. But this week’s congressional elections, which delivered more Republican control on the Hill, may well determine whether the political coalition behind U.S. leadership in the Bretton Woods institutions collapses entirely or reasserts itself during a period of ever more deeply divided government. While it’s easy enough to imagine partisan divisions standing in the way of renewed leadership, there are some grounds for hope for a different path.

The World Bank and IMF have always attracted controversy, and no less so in recent decades, from the “50 Years Is Enough” movement on the left to the scathing attacks of the conservative-leaning Meltzer Commission. The attacks have sometimes been grounded in a broader sense that the institutions themselves had steered off course. But even during these periods, both institutions could count on a base level of political support from whoever was in the White House and key leadership of both parties in Congress.

Yet, political support for the World Bank and IMF has become increasingly strained in Washington, ironically at a time when the institutions’ missions and performance arguably are less controversial than they’ve been in many decades. To some degree, we can blame the tenuous support on divided government. Is it any wonder the Obama administration has failed to convince House Republicans on IMF reform, when they have yet to be convinced on virtually anything coming from the White House?"

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" . .  the United States has enjoyed tremendous benefits from these institutions as “strategic assets” in the multilateral realm. Just look at the speed and scale of support the IMF provided to the U.S.-backed government in Ukraine earlier this year, something that would have been impossible for the United States to pull off on its own.

The relationship between the United States and the Bretton Woods institutions has functioned in this manner for so long that it is easily taken for granted. At least it was until China decided to make a major play in the multilateral space through the Asian Infrastructure Investment Bank (AIIB). It’s not surprising that US officials would react negatively to China’s multilateral overtures in Asia. While US concerns are expressed around issues of environmental safeguards and anti-corruption standards, the unspoken fear is about loss of US influence in the region.

House Republicans ought to share this fear. And we don’t need to make a villain of the AIIB in order to appeal to House members’ sense of the U.S. position in the world. Do they want that position to be one of retreat, with U.S.-led multilateral institutions shrinking in the global landscape? Or, will they now revisit the value proposition of the Bretton Woods institutions, where relatively small US investments ensure global reach and influence in regions and countries that matter to us? The choice seems obvious. Let’s hope the new majorities on the Hill take the first big step forward with swift passage of the IMF reform package."

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My added comments:

One of the interesting things about doing this blog is how you can follow an issue like this over time. Here we have an issue that has the potential to greatly change the existing monetary system structure and lead to even bigger changes which would impact everyone. But there is very little media coverage of it and most people have no idea the issue even exists or any idea why they should care about it.

Another interesting observation I might make here is that critics of the global financial institutions, central banks, and too big to fail international banks believe that these organizations wield unchecked power and can do anything they please. While they do obviously have a lot of power and influence, this IMF reform issue illustrates that they do not always get what they want. All of these global institutions strongly endorse the 2010 IMF reforms, but they still are not passed. And this article notes that the new Congress is likely to remain opposed even as it calls on the Congress to pass the reforms. 

They are so discouraged about the prospects for the reforms to pass that they are now talking about how to bypass the normal approval process to get the reforms in place in 2015. If they do move forward on that plan, it will be interesting to see how the US Congress reacts and if the general public even knows what is happening with it. This will be one of our keys to watch in 2015 here on the blog.

Added note: In other Bretton Woods Committee news, they list a closed door conference in February 2015 titled "Reassessing the IMF's role in Sovereign Debt Crisis".  That should  be an interesting discussion, but the public is not invited. Here is the notice as posted on the Bretton Woods site:

Roundtable: Reassessing the IMF's Role in Sovereign Debt Crises

Date: 

 Fri, Feb 6, 2015 9:30am - 12:00pm

Attendance restrictions: 

 by invitation only

Location: 

 International Monetary Fund, 700 19th Street, N.W., Washington, D.C. 20431

In recent months the Fund has been reassessing its lending practices during sovereign debt restructuring, including the IMF’s Exceptional Access Lending Framework. Reforms strive to achieve an appropriate balance between protecting the Fund from mission creep and a potentially more tenuous financial position, and protecting the highly integrated international financial system. Under consideration are ideas to utilize debt reprofilings more frequently in exceptional access cases where there is uncertainty over a member’s debt sustainability, and to eliminate the systemic risk exemption adopted during the Eurozone crisis.

During this event, Bretton Woods Committee members will have a closed-door dialogue with IMF General CounselSean Hagan, Economic Counsellor, Olivier Blanchard, as well as other Fund representatives, to provide input as the Fund considers proposals for policy reform in this area.

Due to limited capacity, this event is by invitation only.