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After Strauss-Kahn Steps Down, IMF Leadership ‘Jockeying Has Begun’

May 19, 2011 at 12:00 AM EST
Former IMF head, Dominique Strauss-Kahn, resigned five days after being accused of attempted rape and sexual assault of a hotel maid. Jim Lehrer discusses what's next for the IMF and Strauss-Kahn with Bloomberg TV's Sara Eisen and The Economist's Zanny Minton Beddoes.
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JIM LEHRER: More now from Zanny Minton Beddoes, economics editor of The Economist, and Sara Eisen of Bloomberg TV. She was in that New York courtroom today.

And, Sara, describe the scene. What was it like in there?

SARA EISEN, Bloomberg Television: Well, it was a media frenzy, Jim, outside the courthouse, lined up along the street, Center Street, 100 Center Street, outside the Manhattan Criminal Court, tents pitched with media, camera crews from all over the world, not just New York City media. Inside the courthouse, I waited on line for about two, two-and-a-half hours just to get inside the courtroom with a select group of journalists.

The room was packed, buzzing with journalists from around the world, lots of French reporters as well. Then a hush came over the crowd once Strauss-Kahn’s wife, Anne Sinclair, and his daughter entered the courtroom. From then, it was quiet, all attention on the hearing, the bail hearing.

JIM LEHRER: How would you describe Strauss-Kahn’s demeanor and appearance?

SARA EISEN: He did look tired and haggard. After all, he has spent the last three nights in a Riker’s Island single-person jail cell.

He walked in. He looked immediately at his wife and daughter. He did flash a smile to them, sat down. He was dressed in ordinary clothes, what you would typically see him in, say, in an IMF meeting, a blazer, a gray blazer, and either a light-gray or light-blue collared shirt, very serious, quiet, did not speak for the entire hearing.

And, then, at the very end, once the bail had been granted, he did look back at his wife and his daughter, and he smiled at them once again. You could tell there was a sense of relief to hear that news. And that was confirmed later by his lawyer, William Taylor.

JIM LEHRER: And the judge made it clear that the issue here wasn’t collecting bail money. He — they wanted to ensure that Strauss-Kahn didn’t go anywhere, right? Was that very clear, clearly made to him, do you think?

SARA EISEN:It was very clear. In fact, at the very end, the judge turned to Dominique Strauss-Kahn.

He said, “You, sir need to be here. You need to be in court. This entire decision was based on my only concern, and that is that you will not leave New York and that you will appear before court.” He said that, if that doesn’t happen, then they will revisit and could modify the bail ruling.

So, that certainly was very, very clear. It was his main concern, beyond the monetary bail, that he remain in New York City. It’s why he agreed, say, to the 24-hour security guard to stay with Strauss-Kahn, including the ankle bracelet security to monitor his activity, make sure he doesn’t leave and he is called to court for justice.

JIM LEHRER: And the — and, of course, the critical issue there, of course, is that if, in fact, he does — did leave the United States and went back to France, there’s no extradition treaty with the U.S., correct?

SARA EISEN: Exactly.

And the judge made it clear that, if he were to escape, if he were to go to France, it would be nearly impossible for him to return and appear in a New York City court. He also demanded that Strauss-Kahn hand over his passports. One of his passports has already been surrendered. According to the prosecution, he will also — he has agreed this week to give his U.N. passport, so he cannot leave the country.

JIM LEHRER: Now, an arraignment has been scheduled for June 6. What happens during — at this arraignment?

SARA EISEN: This is the arraignment for the indictment.

We learned — it was revealed during the hearing today, first from the prosecution, that a grand jury had been meeting this week to hear the evidence, and they had voted in favor of an indictment against Strauss-Kahn to proceed, proceed to trial with the charges against him, all seven charges against him.

So that will no longer take place tomorrow, as it was supposed to, whether the grand jury would proceed with the indictment, because we learned it today during the bail hearing. That means the court will be adjourned again on June 6, where we will hear more details about the indictment. We don’t know exactly what’s in it. We will likely learn in about 10 days.

JIM LEHRER: And at that time, a formal plea would be entered too, correct?

SARA EISEN: Right. He has not given his formal plea yet, although his lawyer, William Taylor, did say that he does — he does intend to plead not guilty, he has denied all wrongdoing.

And in his resignation as the chief of the IMF last night around midnight, a very strong denial of the charges against him — he vowed to spend all of his time and energy going forward to fighting to prove that he is innocent. In court today, his defense lawyer, William Taylor, did say Strauss-Kahn has one goal from now on, and that is to clear his name.

JIM LEHRER: OK. Well, thank you, Sara.

Now Zanny, the — meanwhile, the people who want to replace Strauss-Kahn are on the move. How would you describe that situation? Where are — what — what is the process that is going on?

ZANNY MINTON BEDDOES, The Economist: You described it very well in your report earlier. The jockeying has begun.

JIM LEHRER: Yes. Yes.

ZANNY MINTON BEDDOES: This is a — the horses are out the gates, if you will. And the Europeans have made very clear that they intend and want the tradition of the last 65 years to continue, which is, this is a job that has always traditionally gone to a European. There has been a kind of stitch-up for the last 65 years.

JIM LEHRER: Not by formal — not by formal rule.

ZANNY MINTON BEDDOES: Not formally, but by informal convention, the head of the IMF has always been the European and the head of the World Bank has always been an American, the transatlantic…

JIM LEHRER: Period, period.

ZANNY MINTON BEDDOES: Period. That’s always been the case.

And for the past few years, the emerging economies have been increasingly angry about this. And they have said that this doesn’t reflect the changing heft in the world economy, that it’s a non-meritocratic, non-competitive process, and they wanted changed.

And there was — in some sense, there was a move towards that change in the past few years. People recognized there had to be governance reform of the IMF. And — and this is going to be a very real test. And, today, you have seen both sides come out. The Europeans have said it should be a European, we think it should be a European because the most important work right now is in Europe, the debt crises in Greece, in Portugal, in Ireland.

And so, they say, it has to be a European there. I have to say I find that logic somewhat tricky, because the IMF is supposed to be an impartial — impartial actor in all of this. And if have someone from Europe already closely involved in this, it is not clear to me that they are going to be terribly impartial.

JIM LEHRER: Now, Treasury Secretary Geithner says he wants an open process. What does he mean by — what is an open process under that definition?

ZANNY MINTON BEDDOES: He said open. He also said prompt.

JIM LEHRER: Prompt, yes.

ZANNY MINTON BEDDOES: And so I think the two push in two different directions, because prompt suggests perhaps, well, you know, let the Europeans have their thing. Open suggests it needs to be a broader set of players, if you will.

I think the Americans are playing their cards very close to their chest right now. They are really kingmakers in this process. The Europeans control about a third of the heft on the IMF’s board. The U.S. controls just under 20 percent. And so, if the U.S. puts its weight behind a European candidate, basically, that candidate is in.

JIM LEHRER: That’s it.

ZANNY MINTON BEDDOES: But, at the same time, I think the emerging economies have to do more than just say it’s time for them — their person to have a go. They have to coalesce behind a clear candidate. And that hasn’t really happened yet.

JIM LEHRER: Now, what is the process? Is there a procedure that — and a timeline for getting this done?

ZANNY MINTON BEDDOES: There is traditionally a procedure, but the IMF’s board, as your report said, is actually meeting right now to think about over the next few days what — exactly what the process will be like.

And I’m sure there will be a few changes to that process. Timing, well, on the one hand, you want — I think everyone wants this sort of over with reasonably quickly. There is a lot of work to be done, particularly in Europe. On the other hand, I think there has to be some semblance of an open process.

I think you can’t just shoo in somebody overnight.

JIM LEHRER: Finally, let me ask you this. For folks who do not cover or follow the IMF, the International Monetary Fund, how important is it to most people who the managing director of the IMF is?

ZANNY MINTON BEDDOES: That is a very good question. And what — why do we all care about this?

JIM LEHRER: Yes. Why do we care?

ZANNY MINTON BEDDOES: Well, I think in — there are two answers to that.

In the short term, the IMF, which is the world’s premier economic institution, it lends money to countries in crisis. It plays a very important role in the global economy, and it’s very embroiled right now in Europe, in Greece, in Portugal, in — in Ireland.

And I think it’s very important for that process, where the IMF is playing a pretty critical role actually in kind of defining what direction those rescue plans go. But, more broadly, and in the longer term, we’re in the midst of a very big structural change in the world economy, where the emerging economies, as you know, are becoming bigger and more important players in the world economy.

JIM LEHRER: It affects everybody.

ZANNY MINTON BEDDOES: It affects everybody.

And one — one part of, you know, managing that rise of the emerging economies and managing the impact on the global economy is to have kind of credible fora where everybody gets together and talks about the effects on different parts of the world.

And the IMF is a really central player in that. And if the fund is not led by a — doesn’t have a strong and credible leader — and Mr. Strauss-Kahn, for all his personal failings, was widely seen…

JIM LEHRER: Was a strong leader?

ZANNY MINTON BEDDOES: … as having been a very, very strong and effective leader.

I think a weak IMF is not good for the world economy.

JIM LEHRER: And a weak leader could result in a weak IMF and like a…

ZANNY MINTON BEDDOES: Absolutely. Too often, in — particularly in U.N. appointments and things, you have seen compromise candidates or, indeed within Europe…

JIM LEHRER: Sure.

ZANNY MINTON BEDDOES: … compromise candidates who have been weak leaders.

JIM LEHRER: All right. OK.

Zanny and Sara, thank you both very much.

SARA EISEN:Thank you.