Posted at 02:33 PM ET, 05/16/2011

IMF scandal: What does Dominique Strauss-Kahn’s arrest mean for the fund?


International Monetary Fund (IMF) chief Dominique Strauss-Kahn appears in Manhattan Criminal Court. (By Shannon Stapleton/Reuters)
The latest issue of Washingtonian magazine asks “Could this man be the next French president?” The unfortunately timed cover story profiled Dominique Strauss-Kahn, the head of the International Monetary Fund who has lived in Washington for three years. Until Sunday, he had been so widely unknown in the United States, Washingtonian entitled their profile of him “The Invisible Man.”

That all changed Sunday when Strauss-Kahn was arrested on board an Air France flight moments before takeoff for allegedly sexually assaulting a maid in his hotel room.

A New York court denied him bail Monday. France is in turmoil over the news, and the IMF has suddenly found itself in the global spotlight.

Even prior to the scandal, the IMF’s usefulness has been called into question. Founded shortly after World War II, it works as a “financial firefighter,” as The Post’s Anthony Faiola described it in 2008. To countries in crisis, the IMF would step in to offer economic guidance and foreign-exchange loans.

While the premise seems like a positive world role, IMF has been criticized for favoring Western countries over developing nations. The IMF often requires strict measures for the borrowing nation to comply with in order to get the loan.

Many developing countries stopped relying on the IMF and began shoring up their own reserves for times of crisis.

Strauss-Kahn took the job at IMF in November of 2007. At the time, he oversaw 2,900 people from 187 countries, with a budget of $340 billion and $600 billion out in loans, the Washingtonian profile reports. During the global financial crisis, he had to cut 400 jobs, while seeking to help struggling European nations.

Before his arrest, Strauss-Kahn had pushed for leniency for Greece’s bailout, but NPR’s “Planet Money” says that without him at the helm, the restructuring plans could be in danger.

The IMF has quickly backed away from Strauss-Kahn, nominating a new acting managing director within hours of the arrest.

By  |  02:33 PM ET, 05/16/2011

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