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Trump risks revolt with controversial World Bank pick
WASHINGTON, Feb 6, 2019 (BSS/AFP) – US President Donald Trump is due on
Wednesday to unveil a controversial candidate to lead the World Bank, a
choice that could spark a revolt against US dominance of the institution.
The White House has confirmed to fellow Group of Seven nations that Trump
will nominate US Treasury official David Malpass, a person familiar with the
matter told AFP, intending to maintain US control of one of the leading
global bodies.
The Washington-based lending institution has been led by an American since
the bank’s founding in the aftermath of World War II, while its sister
institution, the International Monetary Fund, has always been led by a
European.
In recent years, the growing emerging market countries have challenged
this unwritten arrangement, demanding a more open, merit-based selection
process.
Experts had thought it unlikely those countries would join forces against
the US candidate but agreed they might react more strongly to Malpass, a
strident critic of the World Bank and IMF who has called their lending
“corrupt.”
Malpass’s nomination, scheduled to be announced at 1630 GMT on Wednesday,
would follow a Trump administration pattern of appointing the avowed
political opponents of government institutions — such as key environmental
and financial regulators — as their chief executives.
In one example, a Senate committee on Tuesday advanced Trump’s nomination
of former coal lobbyist Andrew Wheeler to lead the Environmental Protection
Agency, replacing Scott Pruitt, who resigned last year under a cloud of
ethics investigations but who had forged a reputation by repeatedly suing the
EPA itself.
– ‘Toxic choice’ –
Many, including former Treasury officials from both political parties,
have sharply criticized Malpass and his qualifications, pointing to his
failure to foresee the global financial crisis and opposition, which later
proved unjustified, to Federal Reserve policies.
“David Malpass would be a disastrous, toxic choice for World Bank
president,” said Tony Fratto, former Treasury assistant secretary in the
George W. Bush administration.
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Malpass, currently US Treasury undersecretary for international affairs,
has sharply criticized the World Bank for continuing to lend to China and
other relatively well-off countries.
And in testimony before Congress in November 2017, he said the World Bank
and IMF were “often corrupt in their lending practices and they don’t get the
benefit to the actual people in the countries.”
Malpass was chief economist at the former investment bank Bear Stearns
from 1993 until it collapsed in 2008 at the start of the global financial
crisis and ran unsuccessfully for the Senate before serving on Trump’s
transition team.
But last year he led negotiations that ended with a “historic” increase in
the bank’s lending capital by $13 billion, after shareholders agreed to a
reform package that curbs loans and charges more for higher income countries
like China.
Scott Morris, a former official in Barack Obama’s Treasury who managed
relations with the World Bank, said Malpass would have difficulty convincing
shareholders to look past his statements.
“It’s fully within their ability to block an unsuitable nominee,” Morris
said in a statement.
The surprise early departure of World Bank President Jim Yong Kim,
effective February 1, not even halfway through his second five-year term,
allows Trump to weigh in on his successor.
After reshaping the US presidency, traditional alliances, trade relations
and the US Supreme Court, Trump could now have a chance to influence how
countries like China access concessional lending.
The bank’s board will accept nominations from February 7 through March 14,
and plans to name a new president prior the IMF and World Bank Spring
meetings, set for April 12-14 in Washington. Any of the 189 members can
propose a candidate.
The United States is the biggest shareholder in the World Bank but does
not have a veto and needs the backing of European nations in a simple
majority vote by the board.
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– Eroding credibility? –
However, if Europe were to oppose the US selection, it would tacitly be
giving up leadership of the far more prominent IMF once its current chief
Christine Lagarde departs.
And that is something experts say will be difficult to achieve.
Mark Sobel, who had a long career with the US Treasury Department and
oversaw relations with the IMF, and who overlapped with Malpass at Treasury,
declined to comment on the choice.
However, he cautioned that failure to name a “credible” candidate could
unite World Bank members to oppose the US choice, especially if that choice
is “a person seen as hostile to the institution.”
He has called for an end to the tradition of Americans and Europeans
leading the two primary global lending institutions.
“I also think that ultimately institutions are better served by having a
credible person running them regardless of their nationality,” Sobel told
AFP.
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