The UK Telegraph runs this article detailing the news that a review of the IMF by its Independent Evaluator turned up a number of problems. Below are a few excerpts from the article and then a bullet point list of the issues/problems cited in the report.
------------------------------------------------------------------------------------"The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.
This is the lacerating verdict of the IMF’s top watchdog on the Fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions.
It describes a “culture of complacency”, prone to “superficial and mechanistic” analysis, and traces a shocking break-down in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.
The report by the IMF’s Independent Evaluation Office (IEO) goes above the head of the managing director, Christine Lagarde. It answers solely to the board of executive directors, and those from Asia and Latin America are clearly incensed at the way EU insiders used the Fund to rescue their own rich currency union and banking system."
. . . . .
"In an astonishing admission, the report said its own investigators were unable to obtain key records or penetrate the activities of secretive "ad-hoc task forces". Mrs Lagarde herself is not accused of obstruction.
“Many documents were prepared outside the regular established channels; written documentation on some sensitive matters could not be located. The IEO in some instances has not been able to determine who made certain decisions or what information was available, nor has it been able to assess the relative roles of management and staff," it said."
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Here is bullet point list of some of the issues raised in this report:
- lack of institutional control
- failure to see a crisis coming
- failure to see balance of payments problems within the EU
- failure to understand the problems related to a single regional currency unit but government policy still determined nationally
- inability to access date from "secret ad hoc groups" within IMF
- hanging Greece out to dry to save the EU
Obviously this is not going to improve the image of the IMF with the general public (at least that part of the general public who pays attention to things like this). One view might be that in order to get needed reforms, you must first admit problems exist. Perhaps that is what this will lead to as the full report lists a number of "lessons learned" in its concluding section (start on page 51).
But it's fair for the public to ask the question:
Why should we trust organizations like this to be the problem solver in the next big crisis given the list of issues cited above by their own evaluator? It's up to those who would ask the public to grant them the power to make these big decisions that impact their lives to demonstrate that they are worthy of that kind of trust. This report won't help in that regard.
I do think it may lend support to those who are calling for reforms like Robert Pringle, Warren Coats, and others. They are concerned that policy makers are not motivated to make reforms and are satisfied with the status quo. This report seems to confirm their concerns in that area and mentions monetary system issues (balance of payments and currency issues) as part of the problem. Perhaps this will lead to a change in mindset about the need for reforms?
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Added notes: There is extensive media coverage on this news. Below is a list of just some of the articles on this that show up if you do a google search on "IMF news"
http://www.forbes.com/sites/
Despite all this, Christine Lagarde gave this public statement (from The Guardian article above):
Christine Lagarde, the fund’s managing director, said: “Overall, the conclusion I draw is that the fund’s involvement in the euro area crisis has been a qualified success.”
. . . . .
“In summary, the crisis in the euro area was extraordinary,” Lagarde said. “It posed unprecedented challenges that, with the global financial crisis providing tinder, could have rapidly spread through Europe and beyond. The fund, in conjunction with our membership, our partners in Europe, and the wider global community, took steps that averted what could have been a much more severe European and even global crisis.”
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