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Brett Arends' ROI
May 18, 2011, 12:00 a.m. EDT
By Brett Arends, MarketWatch
BOSTON (MarketWatch) "” The arrest of Dominique Strauss-Kahn on allegations of attempted rape brings the International Monetary Fund the one thing it wants least of all.
Attention.
This unelected institution is to the modern world what the Roman Catholic Church was to the Middle Ages: the real power behind the throne "” everywhere, operating in the shadows and never held to account. Consider the market talk that Strauss-Kahn's arrest may hurt Greece's chances to refinance its debt. That such a thing could even be considered tells you a lot.
Ashby Jones and David Gauthier-Villars discuss the charges brought against IMF head Dominique Strauss-Kahn and the effect of his arrest on French public opinion. (Photo: REUTERS/Emmanuel Dunand/Pool)
It is a depressing testimony to human nature that only a sordid sex scandal gets people's notice.
But while it does, let me jump on the bandwagon shamelessly to direct you to a real IMF scandal that actually affects everyone's lives and which went under the radar.
It broke just a few months ago, but you probably didn't see much coverage on the evening news. I doubt the kaffeeklatsch picked it up on "The View."
The story: How the IMF's arrogance, complacency and political intrigue helped lead to the greatest financial crisis in three generations.
That's not just my opinion. It's the opinion of the IMF's own independent auditors, the Independent Evaluation Office. It was tasked with finding out just what went wrong. Read the full report: "IMF Performance in the Run-Up to the Financial and Economic Crisis."
From 2004 up until mid-2007, IEO investigators found, the IMF remained pretty much oblivious to "the vulnerabilities and risks that eventually brought about the crisis."
The organization failed to issue clear warnings. Indeed "as late as April 2007, the IMF's banner message was one of continued optimism within a prevailing benign global environment."
No kidding "” several months after "subprime" already had started to cause alarm on the financial markets.
Do you think this doesn't matter? It's all ancient history? We now have mass unemployment here in the United States, record bankruptcies and foreclosures and countless broken families as a result of the financial devastation of the last few years. The national government is hurtling toward a new financial crisis. And look at the crisis in Europe.
The IMF is the point man for the financial system. Where was it during the credit bubble?
Sudeep Reddy discusses what the steps the International Monetary Fund is taking with its chief in jail facing indictment. Plus, what are the challenges facing a Strauss-Kahn successor?
In a devastating critique, those investigating the IMF found the reasons why it fell asleep on the job: arrogance, complacency and politics.
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Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He was educated at Cambridge and Oxford Universities, and has worked as an analyst at McKinsey & Co. He is a Chartered Financial Consultant (ChFC) and Accredited Asset Management Specialist (AAMS). His latest book, "Storm Proof Your Money," has just been published by John Wiley & Co.
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