Likely World Bank chief critical of its task

Mr David Malpass has been openly critical of both the World Bank and International Monetary Fund, saying there was "a lot of room for improvement" in the bank's lending programmes.
Mr David Malpass has been openly critical of both the World Bank and International Monetary Fund, saying there was "a lot of room for improvement" in the bank's lending programmes.PHOTO: REUTERS

Trump's pick for job faces attacks on his competence and support for bank's mission

WASHINGTON • Even before his nomination has been publicly confirmed, Mr David Malpass, US President Donald Trump's pick to run the World Bank, faces mounting attacks on his competence and support for the bank's mission.

Mr Malpass, Undersecretary of the Treasury for International Affairs, is an outspoken critic of the bank and its sister organisation, the International Monetary Fund (IMF). The President plans to nominate the former Wall Street economist to head the bank, a pillar of the global order that Mr Trump opposes, as soon as yesterday.

The appointment will likely trigger another clash between Mr Trump's "America First" views and the decades-old consensus over management of the global economy. Since 1944, when global financial institutions were created near the end of World War II, the US has selected the bank's president while European countries have controlled the top IMF job.

"Malpass has never distinguished himself with an interest in the mission of the World Bank," said Mr Tony Fratto, former White House and Treasury Department spokesman in the George W. Bush administration. "It's an odd career-capping type of appointment for someone with very little demonstrated interest in these topics. It's hard to see how he can be deemed qualified for this job."

Mr Malpass, 62, has been openly critical of both the World Bank and IMF, saying there was "a lot of room for improvement" in the bank's lending programmes. White House press secretary Sarah Sanders told reporters on Tuesday that Mr Malpass would be "a great choice" if Mr Trump formally nominates him.

"Globalism and multilateralism have gone substantially too far, to the point that they are hurting US and global growth," Mr Malpass told a House subcommittee in 2017.

Still, last year, he supported a US$13 billion (S$17.6 billion) capital increase for the bank, its first in eight years, which was packaged with reforms to internal operations and spending practices.

If confirmed to run the bank, Mr Malpass would seek to reduce lending to middle-income countries such as China and India, which he has said enjoy ready access to private capital markets.

He would replace outgoing president Jim Yong Kim, who resigned unexpectedly earlier this year to accept a private sector job managing infrastructure investments in developing countries. Mr Kim endured a rocky tenure at the bank, launching a disruptive reorganisation that alienated the rank-and-file.

In its most recent fiscal year, the bank doled out nearly US$67 billion in financing, investments and guarantees, its annual report shows.

As word of the Malpass appointment leaked in recent days, it drew fire from bank allies. Mr Malpass lacks the high profile of some former bank presidents, such as Robert McNamara, former defence secretary; James Wolfensohn, a globe-trotting banker and investor; and Robert Zoellick, who had served as deputy secretary of state and chief US trade negotiator.

 
 

Mr Malpass was chief economist at Bear Stearns, the Wall Street investment bank that collapsed amid the financial crisis in March 2008. Seven months earlier, even as some of the bank's own hedge funds were failing, he authored a remarkably sunny Wall Street Journal opinion article that played down the danger of an economic downturn. "Housing and debt markets are not that big a part of the US economy, or of job creation. It's more likely the economy is sturdy and will grow solidly in coming months, and perhaps years," Mr Malpass concluded.

Little more than a year later, the economy toppled into the worst recession since the 1930s.

After Bear Stearns failed, Mr Malpass unsuccessfully sought the 2010 Republican nomination to run for the US Senate. In 2016, he joined the Trump campaign as an economic adviser.

At Treasury, he has been a fierce critic of the increasing role of the state in China's economy and has participated in ongoing trade talks with Beijing. But he was forced into an embarrassing reversal one year ago after saying wrongly that the administration had "discontinued" an economic dialogue with Beijing.

Mr Malpass was forced to backtrack as the Treasury Department disavowed his comments.

His nomination comes with several developing nations already impatient for a greater say in running international financial institutions.

The bank's board of executive directors ultimately determine the next president. The US controls almost 16 per cent of the votes, nearly four times China's share, while European countries have more than one-quarter.

"I think the Europeans will push back a bit," said one former US Treasury official, adding: "In the end, they'll probably swallow it."

WASHINGTON POST

A version of this article appeared in the print edition of The Straits Times on February 07, 2019, with the headline 'Likely World Bank chief critical of its task'. Print Edition | Subscribe