Even before his nomination has been publicly confirmed, David Malpass, President Trump’s pick to run the World Bank, faces mounting attacks on his competence and lack of support for the bank’s mission.
The appointment will probably trigger another clash between Trump’s “America First” views and the decades-old consensus over management of the global economy. Since 1944, when international financial institutions were created near the end of World War II, the United States has selected the bank’s president while European countries have controlled the top IMF job.
“Malpass has never distinguished himself with an interest in the mission of the World Bank,” said Tony Fratto, former White House and Treasury Department spokesman in the George W. Bush administration. “It’s an odd career-capping type of appointment for someone with very little demonstrated interest in these topics. . . . It’s hard to see how he can be deemed qualified for this job.”
Malpass, 62, has been openly critical of both the World Bank and IMF, saying there was “a lot of room for improvement” in the bank’s lending programs and calling for changes to better focus its operations. White House press secretary Sarah Sanders told reporters on Tuesday that Malpass would be “a great choice” if Trump formally nominates him.
“Globalism and multilateralism have gone substantially too far, to the point that they are hurting U.S. and global growth,” Malpass told a House subcommittee in late 2017.
Still, Malpass last year supported a $13 billion capital increase for the bank, its first in eight years, which was packaged with restructuring to internal operations and spending practices.
If confirmed to run the bank, Malpass would seek to reduce lending to middle-income countries such as China and India, which he has said enjoy ready access to private capital markets.
He would replace outgoing president Jim Yong Kim, who resigned unexpectedly this year to accept a private-sector job managing infrastructure investments in developing countries. Kim endured a rocky tenure at the bank, launching a disruptive reorganization that alienated the institution’s rank-and-file.
The Korean American physician cultivated administration support by partnering with Ivanka Trump, the president’s daughter, on a $350 million fund for female entrepreneurs in developing nations.
After Kim resigned, she was included in one published report about possible replacements to helm the bank, a prospect the White House subsequently labeled “false.”
The White House did consider other candidates, including Heidi Cruz, who works for Goldman Sachs in Houston and is the wife of Sen. Ted Cruz (R-Tex.), according to a source familiar with the matter, who asked not to be named in discussing confidential discussions.
In its most recent fiscal year, the bank doled out nearly $67 billion in financing, investments and guarantees, according to its annual report.
As word of the Malpass appointment leaked in recent days, it drew fire from bank allies. Malpass lacks the high profile of some former bank presidents, such as Robert McNamara, former defense secretary; Sir James Wolfensohn, a globe-trotting banker and investor; and Robert Zoellick, who had served as deputy secretary of state and chief U.S. trade negotiator.
“Trump poses a unique threat to the international system. He’s nominating somebody, not just of dubious qualifications, but somebody who is committed to undermining the multilateral mission of the bank,” said Justin Sandefur, a senior fellow at the Center for Global Development.
Malpass worked on Wall Street as chief economist to Bear Stearns, the investment bank that collapsed amid the financial crisis in March 2008. Seven months earlier, even as some of the bank’s own hedge funds were failing, he wrote a remarkably sunny Wall Street Journal opinion article that played down the danger of an economic downturn.
“Housing and debt markets are not that big a part of the U.S. economy, or of job creation. It’s more likely the economy is sturdy and will grow solidly in coming months, and perhaps years,” Malpass concluded.
Little more than a year later, the economy toppled into the worst recession since the 1930s.
After Bear Stearns failed, Malpass unsuccessfully sought the 2010 Republican nomination to run for the U.S. Senate from New York. In 2016, he joined the Trump campaign as an economic adviser.
At Treasury, he has been a fierce critic of the increasing role of the state in China’s economy and has participated in ongoing trade talks with Beijing. But he was forced into an embarrassing reversal one year ago after saying wrongly that the administration had “discontinued” an economic dialogue with Beijing.
Malpass was forced to backtrack as the Treasury Department disavowed his comments.
His nomination comes with several developing nations already impatient for a greater say in running international financial institutions.
The bank's board of executive directors will ultimately determine the next bank president. The United States controls almost 16 percent of the votes, nearly four times China's share, while European countries have more than one-quarter.
“I think the Europeans will push back a bit,” said one former U.S. Treasury official, who asked for anonymity to discuss diplomatic conversations. “In the end, they’ll probably swallow it.”
Josh Dawsey contributed to this report.