DSK Quits IMF

Tyler Durden's picture

The most anticlimatic news of the week is that, as everyone expected, DSK has resigned his post as IMF head. "“I want to devote all my strength, all my time, and all my
energy to proving my innocence,” Strauss-Kahn said in a
statement released by the Washington-based IMF four days after
his arrest on sexual-assault charges. The fund said it will
comment “in the near future” on the succession. Strauss-Kahn, 62,
had been leading polls for France’s 2012 presidential election." And with his passage, the Feudal (as defined by El-Erian) "conclave" to pick his successor begins. Per Bloomberg: "European officials, who have picked IMF heads for 65 years under a deal that also gives the U.S. the lock on the top World Bank post, moved to retain the privilege, with Sweden backing French Finance Minister Christine Lagarde. Russia and South Africa have called for an emerging-market candidate, while some Asian policy makers suggested someone from their region." And now the specter of mutual assured destruction posturing shifts to selecting a desired candidate quickly. "Time is of the essence,” said Julie Chon, a senior fellow at the Washington-based Atlantic Council and former adviser to the U.S. Senate Banking Committee. “The longer the IMF allows the specter of uncertainty to hang over its leadership, the more exposed it becomes to the jittery actions of sovereign debt and foreign-exchange traders who have been speculating on what the leadership vacuum means for their portfolios."

As a reminder, according to the Economist, here are the odds for the most likely replacement:

And some more from Bloomberg:

Strauss-Kahn’s five-year term had 17 months remaining. In past successions, incoming managing directors were appointed to fresh five-year tenures.

“I would argue that Christine Lagarde has outstanding credentials,” Swedish Finance Minister Anders Borg said in a Bloomberg Television interview today. Her gender is also an “advantage” since “half of the world has not been represented as managing director,” he said.

Nout Wellink, a European Central Bank Governing Council member, told the Dutch talk show Knevel & Van den Brink late last night: “I know a fantastic candidate, that’s Jean-Claude Trichet,” whose term as ECB president ends in October.

Japan, which has the second-biggest share of voting power at the IMF with 6.25 percent, has yet to decide its stance on a Strauss-Kahn successor, Tetsuro Fukuyama, the government’s deputy chief cabinet secretary, told reporters in Tokyo today.

The U.S., which has the largest share of votes, at 16.8 percent, has also given no indication of a preference.

South African and Russian officials said yesterday the next head should come from an emerging economy. Trevor Manuel, head of South Africa’s National Planning Commission, is “highly respected in the world,” Finance Minister Pravin Gordhan said of his predecessor in an interview in Pretoria.

Russian central bank Deputy Chairman Sergei Shvetsov said a developing country should be given the chance to run the IMF to better reflect the role of those economies in global trade. South Korea’s central bank governor made similar remarks before the announcement late yesterday that Strauss-Kahn would resign.

“A new brand of leadership will send a positive signal that the IMF is indeed responsive to the changing world,” Philippine Finance Secretary Cesar Purisima said in a mobile phone text in response to questions. “Wherein Asia increasingly plays a major role as a growth driver of the global economy, there is no time more fitting than now for an Asian leader to take the helm.”

Thai Finance Minister Korn Chatikavanij told his Singapore counterpart, Tharman Shanmugaratnam, he should apply for the job if it opens, the Post Today newspaper reported today.

“So far the leader of IMF is always from Europe -- we would welcome an opening to a candidate from Asia,” Indonesian Finance Minister Agus Martowardojo told reporters today in Jakarta.

At least the new IMF head does not have to convince his voters that breaching the debt ceiling, double digit unemployment, a collapsing middle class and near record gas prices are more than offset by the Russell 2000 being at new record highs...