Friday, July 25, 2008

The IMF mission to the US: embarrassment or normal procedure?

One of the roles of the IMF is to make assessments of economic policies in member countries and forcing them to adopt sounder ones. The important word here is "forcing." Many governments are in fact grateful for this, as it allows to enforce good, but unpopular policy using the IMF as a scapegoat.

In principle, any member country could be subject to such scrutiny. Unfortunately, there is considerable politicking in the IMF, and in particular rich countries manage to impose upon others prescriptions they would adopt themselves. They can get away with it due to current structure of the IMF. We reported before on the need for this structure to be reformed.

In turns out the US will be scrutinized soon within a Financial Sector Assessment Program (FSAP), i.e., a complete analysis of the financial sector. Market participants and government agencies will be required to hand over confidential documents. This is no different than what is done elsewhere, but the uproar is certain to appear.

One could view this as a sign that finally rich economies are coming under the same scrutiny as the poorer ones. Not quite. Indeed, this mission had been on the radar for a long time, but the Bush Administration vehemently opposed it for seven years, but finally gave in on the condition that the report be issued after the handover to the next administration. By then, everyone in charge will be out of office, but one: Ben Bernanke.

1 comment:

Vilfredo said...

It should be a normal procedure, but it is an embarrassment for IMF procedures that the US has been to drag this on for so long.