The International Monetary Fund (IMF) has seen upheavals within itself for a long time. However it became public with Dominique Staruss Kahan, who resigned last month after he was charged with attempted rape, as managing director. He pleaded not guilty.
The position for Managing Director opened, which is an opportunity of a lifetime. At first the candidates for the prestigious position was French Finance Minsiter Christine Lagarde and Mexican Central Bank Chief Augustin Carstens. Then enters Stanley Fischer.
Stanley Fischer, the Governor of Bank of Israel, is the new candidate for the top job at the IMF.
Fischer, who holds U.S. and Israeli citizenship, is getting a late start in a race that has seen Lagarde solidly backed by the European Union. Indonesian Finance Minister Agus Martowardojo also added his support to those backing Lagarde. Further three Gulf countries, UAE, Egypt and Bahrain have pledged their support.
Carstens says he?s backed by 12 Latin American nations, while he hasn?t won an endorsement from the region?s biggest economy — Brazil.
Fischer was born in an area of northern Rhodesia that is today part of Zambia, holds a PhD in economics from the Massachusetts Institute of Technology and served as first deputy managing director of the IMF, a position traditionally held by an American.
?An exceptional and unplanned opportunity has crossed my path, one that may never again present itself, to run for the head of the IMF,? Fischer said in a June 11 e-mailed statement. ?After much deliberation, I have decided to pursue it, despite the fact that it is a complicated process and despite the possible obstacles.?
Fischer did not mention Lagarde by name, but added, “There have been great managing directors in the past who weren’t politicians.” The position of IMF chief, he said, requires “somebody who is respected in every respect, personally and professionally, and who has an ability to work with people and ability to take a stand.”
After the worst global recession since World War II, Fischer helped steer Israel?s economy back to positive figures. ?The central bank forecasts Israel’s economy will expand 5.2 percent this year.
In August 2009, Fischer became the first central bank governor to reverse course in response to signs of a financial recovery when he raised the benchmark interest rate by a quarter point to 0.75 percent. He was given a second five-year term last year and was named central bank governor of the year for 2010 by Euromoney magazine in October.
Fischer earned his undergraduate and master’s degrees at the London School of Economics. He then won a scholarship from MIT, in Cambridge, Massachusetts, where he studied under future Nobel laureate economists Paul Samuelson and Robert Solow. He later joined the faculty at MIT, serving as the thesis adviser to Ben S. Bernanke, now the Federal Reserve chairman.
From 1988 to 1990, he was chief economist at the Washington-based World Bank. As first deputy managing director of the IMF during the 1990s, Fischer worked to resolve financial crises in Mexico, Russia and Southeast Asia
“Fischer would be a fine candidate, but despite his African upbringing and Israeli experience, Fischer is seen first as a U.S. citizen because of his tenure as deputy managing director at the fund,” Bessma Momani, a professor at the University of Waterloo in Canada who specializes in the IMF, said by e-mail.
Fischer, 67, is betting his experience and a shortage of candidates will prompt IMF members to waive an age requirement that would exclude him from the managing director position, a person familiar with the situation said.
Israel’s central bank said in a statement that the IMF will have to decide whether to amend its by-laws, which stipulate that its managing director be less than 65 years at the time of selection, or reject his candidacy. The fund’s members would also have to end an informal agreement under which its managing director is always a European, while an American heads the World Bank
Age is not a barrier for Carstens, 53, or Lagarde, 55.
Fischer, who emigrated from the U.S. to Israel in 2005 to take up the Bank of Israel governorship, described the top IMF position as a “terrific” job in a May 25 interview with Bloomberg News. ?He said the euro-region’s debt crisis doesn’t make it necessary for the fund to elect a European candidate. The IMF approved a record $91.7 billion in emergency loans last year and provides a third of bailout packages in Europe.
?Fischer?s candidacy spices up the race and lends it a tinge of unpredictability but it is unlikely that this will knock Lagarde off her path to victory,? Eswar Prasad, a senior fellow at the Brookings Institution in Washington and a former IMF official, said in an e-mail yesterday. ?The emerging markets are unlikely to view Fischer as a candidate who would effectively advocate for their interests. Besides, he is likely to be seen as essentially an American candidate, which endears him neither to Europe nor to the emerging markets.?
However the emerging nations have baulked at Europe’s 65-year grip on the top job at the Washington-based institution, calling the arrangement outdated.
Also on Sunday, Fischer received a surprise endorsement from Palestinian Authority Prime Minister Salam Fayyad. Fayyad, himself a former World Bank economist, said, “Fischer is the most suitable candidate for the job.”
Lagarde has benefited from the failure of emerging markets to coalesce around a candidate from their own ranks after vowing to end a six-decade European lock on the position. She has tried to turn attention away from her nationality by focusing on her gender and her role in European efforts to head off a Greek sovereign-debt default.
The job traditionally goes to a European, making Lagarde the favourite, with an American taking the top post at the World Bank.
?Sitting on the Fence?
?Everyone is sitting on the fence and waiting for something to happen,? Uriel Goren, head of the international clients desk at Tel Aviv-based DS Securities & Investments, said by telephone. ?It may be related to the fact that his chances of getting the job don?t look huge right now. They aren?t taking it seriously yet.?
Fischer?s entry ?is a wild card; could change everything,? said Simon Johnson, a former chief economist at the IMF, in an e-mail. ?He must have some big backers to throw his hat into the ring at this stage.?
One backer is Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., which runs the world?s largest bond fund.
?Based on professional qualifications and cultural fit, Stanley Fischer is the perfect candidate for managing director of the IMF,? El-Erian wrote in an editorial posted on the Financial Times? website.
?He would likely prevail in an open, transparent and merit-based selection process,? said El-Erian. ?The question is whether European attempts to preclude this can still be overcome by countries that care about the legitimacy of the institution and the beneficial role it should play in the global economy.?
Europe has come out in force for Ms Lagarde while the US and Japan, the IMF’s other power brokers, remain publicly uncommitted.
“We’re not confirming any nominations,” IMF spokeswoman Conny Lotze said yesterday. “The board is in charge of the whole process.”
The U.S is the IMF?s single largest shareholder with almost 17% of the votes, hasn?t announced support for a candidate and Treasury Secretary Timothy F. Geithner has said both Lagarde and Carstens are qualified
Favoring a non-European could mean relinquishing control of the World Bank — an outcome that members of Congress who decide on funding for development banks have said they oppose.
The Washington-based Center for Global Development, an aid research group, said yesterday it has been running a survey about potential IMF candidates. As of June 9, about 800 respondents to their survey rated Fischer as the best candidate in five out of six categories measuring how effective someone would be at running the IMF.
?Our respondents are a very-well informed group of people, said Nancy Birdsall, president of the center, ?so it implicitly indicates an interest in candidates other than Lagarde and Carstens.?
The IMF board aims to pick a candidate by June 30.
Source: Bloomberg, BBC World, Wall Street Journal, The Jerusalem Post, IMF.org, The Australian, The Guardian