IMF: stormbreaker?

At the IMF meeting of member countries on Saturday, the organisation's Managing Director Dominique Strauss-Kahn may reiterate his call for intensified global government intervention given the severity of the current credit crisis.

Considering the tempest-tossed markets, Strauss-Kahn is seeking a more prominent role for the Fund as the guardian of international financial stability.  The IMF on April 8 released its Global Financial Stability Report, calculating that total expected losses and writedowns on US assets could reach 945 billion dollars. Significantly, the IMF argues that non-bank financial institutions -- such as pension funds, hedge funds, and insurance companies -- will suffer nearly half the ultimate losses, a substantial proportion of which will be borne outside of the United States. Examining the top ten US and European banks, the IMF report shows that from mid-2004 to mid-2007 their total assets almost doubled, while their risk-weighted assets (used to assess basic capital adequacy requirements) only increased by around 20%.

The IMF on April 7 passed several governance and finance reforms, ending protracted debates, which seek to lend legitimacy to the institution.  These include a reshaping of the budget, proposals to sell IMF gold, and recalculations of 'quota and voice' packages.  Quotas establish member financial contributions to the Fund, and are key determinants of voting power; under the recent reforms, emerging economies are given slightly more representative weight within the institution.  Strauss-Kahn has emerged as a manager capable of handling tough negotiations.  He is likely to continue to use the credibility and momentum he has attained to map a fresh set for priorities for the Fund during the Spring Meetings.