STOCK MARKET WATCH -- Wednesday, 21 March 2012

[Demeter]

11. With Larry Summers' World Bank Bid in Trouble, Mexico Insists on Open Process

http://www.huffingtonpost.com/robert-naiman/larry-summers-world-bank_b_1362716.html

Early last week the New York Times reported that despite all the previous fine rhetoric about the G20 and consultation and open process, the U.S. Treasury Department had decided to rule by decree and impose its own candidate for the next president of the World Bank, the G20 be damned. U.S. officials informed G20 officials that the U.S. intended to "retain control of the bank," as the Times put it. According to the Times, the G20 countries grumbled but showed no sign of being willing to fight Treasury. The U.S. candidate would be a "lock," the Times said, "since Europe will almost certainly support whomever Washington picks."

Since the International Monetary and the World Bank were created, the U.S. and Europe -- which control around half of the voting shares of these institutions -- have colluded behind closed doors to determine the institutions' top leaders, with Europe selecting the head of the IMF with U.S. support and the U.S. selecting the head of the World Bank with European support. In recent years, developing countries have complained loudly about this practice -- a practice which would be illegal if the World Bank were subject to the Illinois Open Meetings Act -- and under pressure the World Bank has adopted governance reforms that are supposed to guarantee an "open, merit-based process" in selecting the president. But Treasury was claiming that there wasn't going to be any open process, it was going to be Treasury diktat.

But over the course of the last few days, the world has changed.

First, development expert Jeffrey Sachs' public candidacy, and Treasury's rude dismissal of his candidacy -- not even putting Sachs on its "short list," although countries in Africa, Latin America, and Asia have publicly endorsed Sachs' candidacy -- planted the seed of hope that there might be a real race after all. Then 27 Members of Congress, led by Michigan Democrat John Conyers and, sent a letter to President Obama, urging Obama to nominate Jeff Sachs. (SIGNERS LIST AT LINK)


Then, it turned out that the U.S. candidate was Larry Summers. And then it turned out that Europe wasn't going to go along with that after all, the New York Times' "almost certainty" notwithstanding. A week earlier, Treasury had leaked a purported "short list" consisting of former Harvard President Larry Summers, UN Ambassador Susan Rice, and Senator John Kerry. But it turned out that Susan Rice and John Kerry were fake candidates, because neither one wanted the job. So it appears that Treasury Secretary Timothy Geithner really had a "short list" consisting of just one person: his buddy Larry Summers. Perhaps Geithner calculated that if he presented President Obama with a "short list" consisting of Larry Summers and two fake candidates, then Obama would have to choose Summers.

But apparently Geithner did not anticipate that Europe would object to Summers.

Late Friday night, AFP reported:

Harvard University economics professor and former World Bank chief economist Larry Summers is seen as divisive by some key allies of Washington.

Summers doesn't look like a candidate who will have strong support... Apparently, he cannot gain the backing of all Group of Seven countries," the person [close to the World Bank] said.

MUCH MORE AT LINK


And what of the U.S. nomination? The World Bank deadline for nominations was supposed to be this coming Friday, March 23, but Geithner might ask for an extension, because the dog ate his homework. Word has it that in spite of the G7 opposition, Geithner has not given up and is still pushing Summers. President Obama should ask Geithner for a completely new short list, one with three real candidates who all want the job, and all of whom can pass muster with the member countries of the World Bank. And that short list should include development expert Jeffrey Sachs, the only candidate who can say he has the support of governments in Africa, Latin America, and Asia -- not to mention 27 Members of Congress.