More On Legal & Compliancefrom The Advisor's Professional Library
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In the wake of pressure to step down, Dominique Strauss-Kahn, the head of the International Monetary Fund (IMF), has resigned his position. Now the issue of prominence is who will succeed him and preside over the ongoing debt crisis in Europe. Emerging nations calling for a greater say in the functioning of the IMF would like to see one of their own in charge.
Currently incarcerated at Rikers Island in New York on sexual assault charges involving a maid at the Times Square Sofitel Hotel, Strauss-Kahn was arrested and taken from an Air France flight moments before takeoff on Saturday. He was denied bail at his first hearing and his attorneys plan to seek bail in another hearing scheduled for later in the day on Thursday, even as authorities investigate why the French-owned hotel waited an hour to report the assault to police.
In his resignation letter, Strauss-Kahn said, "I deny with the greatest possible firmness all of the allegations that have been made against me. I want to devote all my strength, all my time, and all my energy to proving my innocence." The letter, released by the IMF, was dated Wednesday.
As he remained in custody, the discussion over who should succeed him heated up, as emerging economies press for an end to the tradition, in place since 1945, that a European should head the fund. The succession process itself has come under criticism from no less than Mohamed El-Erian, who said in his blog on Monday that the IMF had "two choices if it has to replace DSK quickly: Retain its feudalistic approach, or implement an open merit-based selection process based on clear criteria and a transparent process."
According to El-Erian, "The first would allow the Fund to move quickly in appointing a new head, but doing so uses a method that lacks credibility and legitimacy. The second would correct a long-standing deficiency, but slow the appointment. Under either approach, the IMF would inevitably operate under a huge cloud."
On Thursday, Thierry Mariani, the French junior transport minister, said that France’s Finance Minister Christine Lagarde would be a "very good candidate" but that another French head of the IMF might be a challenge "in the current context." Anders Borg, the Swedish finance minister, also voiced support for Lagarde, as did Germany. However, she may be facing an investigation over payments to a former politician.
Nout Wellink of the European Central Bank (ECB) commented on ECB President Jean-Claude Trichet’s suitability for the post, but Trichet is past the age limit of 65 set by IMF rules. China, Japan, Mexico, Brazil, and South Africa have all made suggestions about the method of succession that would open it up to non-Europeans and non-Americans.
Japanese Finance Minister Yoshihiko Noda said in the report, "As agreed at G20, heads of international financial organizations and senior leaders should be chosen based on their ability through and open and transparent process, so I think a suitable person should be chosen through such a process."
Currently, the only statement made by the IMF regarding succession came when it released Strauss-Kahn’s resignation letter: "The Fund will communicate in the near future on the Executive Board's process of selecting a new Managing Director. Meanwhile, John Lipsky remains Acting Managing Director." Lipsky, an American, had already stated his intention to step down at the end of August before Strauss-Kahn was arrested.