Molestation Allegations Mandate IMF Changes

by Paul Springer

The International Monetary Fund was already busy with little problems like trying to keep a straight face about China’s currency policies. But now the organization is at the center of a media maelstrom over accusations that IMF Managing Director Dominique Strauss-Kahn sexually assaulted a maid in a New York hotel.

“The Euro fell half a cent to $1.4063 when Asian markets opened on Monday – a six-week low against the dollar – reflecting concerns about the impact the arrest could have on the bailout talks,” according to the BBC.

Strauss-Kahn pleaded not guilty to attempted rape charges, according to an account in The Australian that said a judge in a Manhattan criminal court denied bail and sent the accused off to Rikers Island pending a hearing later in the week.

Strauss-Kahn lawyered up with attorneys including Benjamin Brafman, who has variously represented Michael Jackson and “P. Diddy” Sean Combs.

The accusation comes at a time when Strauss-Kahn was deemed a likely Socialist party candidate in France’s presidential election next year.

The IMF said in a statement that First Deputy Managing Director John Lipsky serves as acting managing director whenever the official managing director is not in Washington, D.C.

While the charges made for sensational headlines, Strauss-Kahn will not be the only one affected if he does not resume his responsibilities with the IMF. The possibility that Strauss-Kahn would end his work with the IMF and run for president already had people wondering about who might replace him at the IMF.

Strauss-Kahn has changed the balance of power at the IMF, Reuters said:

Since Strauss-Kahn’s selection in 2007 as managing director, there has been a major shift within the International Monetary Fund that has elevated China to No. 3 in voting power and given countries such as India, Russia and Brazil a greater voice.

Now speculation has arisen over possible replacements at the IMF, where some say a non-European could take the helm, continuing the trend toward empowerment of emerging nations.

“Among those being mentioned as possible successors to Strauss-Kahn are Kemal Dervis, a former finance minister for Turkey who is now at the Brookings Institution, and Mohammad El-Erian, an Egyptian who heads the giant Pimco bond fund,” the Associated Press said.

A change in top management could be challenging for the IMF, whose many problematic debt situations include Portugal, Greece and Ireland.

A sudden change brings just the kind of uncertainty no one likes. Still, The Telegraph provides a strong argument that a dramatic change may not be something to fear: “To the contrary, it might even bring about a rethink of the currently doomed strategy of throwing good money after bad.”

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