Distraction at the top

Edward has been keeping you all up to date on the resurgence of calls to the IMF fire extinguisher due to the global banking crisis, and the Fund has no doubt welcomed the renewed interest in its present and future functions.  But in an unfortunate weekend news dump, it’s been revealed that IMF Managing Director Dominique Strauss-Kahn is being investigated by the Fund over an affair with another staffer [UPDATED].

Such a relationship would violate staff rules.  The investigation risks opening a major can of worms, not least that of Paul Wolfowitz across the street at the World Bank — though to be accurate, Wolfowitz’s problems arose not from a subordinate relationship per se, which was in the open, but the personnel decisions that arose as a result of it. DSK had seemed to be enjoying himself and his appointment had looked like a Sarkozy master-stroke, removing a political heavyweight from the domestic scene while adding gravitas to the Fund and restoring its traditional Francophone hierarchy — note that an early DSK move was to bring in Olivier Blanchard as chief economist.

But now, who knows?  The Fund has a lot on its plate and could do without any, er, navel-gazing.  Is Laurent Fabius still available?

UPDATE: Here’s more from the Wall Street Journal, which appears to have broken the story.  One noteworthy aspect is its truly global flavour, involving in some way the USA, Argentina, Hungary, Georgia, France, and the UK!  In the Journal’s fuller article (which may require subscription), they need to mention that it’s no accident that the accusation wound up in the hands of the oldest member of the board — that status makes him the board’s dean.

FINAL UPDATE: Here, via the Wall Street Journal (subs. req’d) is DSK’s e-mail to IMF staff today, 20th October–


As you may already know, the Executive Board is undertaking an enquiry into an incident concerning me and a staff member who has since left the Fund. As a matter of good governance, the Board has retained an outside counsel to conduct this inquiry, with whom I have cooperated and am continuing to cooperate. The outside counsel is expected to report to the Board by the end of this month and I am urging that the outcome be made known to staff as soon as possible.

This morning I met with the Board and I would like to repeat to you what I told the Executive Directors. First, I apologized and said that I very much regret this incident. Second, while this incident constituted an error of judgment on my part, for which I take full responsibility, I firmly believe that I have not abused my position. Third, I fully support the process that is underway and I will, of course, follow the Board’s guidance as to how best to resolve this matter.

I want to apologize to the staff member concerned for my error in initiating this relationship. She is a talented economist and consummate professional. I acknowledge and regret the difficult situation this has created for her. I also apologize to my wife and family.

Many of you will feel that I have let you down, and I understand those feelings. I can only urge that, especially given the ongoing financial crisis, we all retain our focus on the work of the Fund and the critical role we must play in helping our membership at this time. I also appeal to you to wait for the full facts to emerge and not be distracted by speculation and rumors in the coming days. I am committed to doing what is right for the institution and it is my fervent wish that this matter be resolved as quickly as possible. I also intend to meet with you soon.

Dominique Strauss-Kahn

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  1. Pingback: IMF tries to defuse geopolitical speculation in DSK affair | afoe | A Fistful of Euros | European Opinion

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