Sunday, May 22, 2011

"The Best Person For the Job", Redux

Is Lagarde, not Brown: Cameron, Osborne

With campaigning to replace the outgoing Managing Director of the International Monetary Fund mounting, many Britons are expecting their government to back a fellow Briton to fill that job.

For now, they will be disappointed.

Speculation has held that former Prime Minister and former Chancellor of the Exchequer Gordon Brown has been quietly campaigning for his shot at the job. Yet current Prime Minister David Cameron and current Chancellor George Osborne seem to have made themselves fairly clear: Brown is not "the best person for the job".

Apparently, according to Cameron and Osborne, the best person for the job may be French Finance Minister Christine Lagarde.

"I believe Christine is the outstanding candidate for the IMF – and that's why Britain will back her," Osborne declared. "I also personally think it would be a very good thing to see the first female managing director of the IMF in its 60-year history."

Lagarde's greatest strength, in Osborne's mind, is that she's in favour of developing countries bringing their budgets under control.

"She has been a strong advocate for countries tackling high budget deficits and living within their means," Osborne noted.

That applies to financial institutions just as much as it does to entire countries. While many western countries were rolling out fat bailout packages for banks, Lagarde was publicly taking them to task, particularly at the World Economic Forum in Davos.

"The best way for the banking sector to say thank you would be to actually have good financing of the economy, sensible compensation systems in place and reinforcement of their capital," Lagarde told Barclay's Bank chief executive Bob Diamond.

As if to offer some substance to Osborne's remarks about a having a woman in charge of the IMF, Lagarde has suggested that the global economy could use a woman's touch, particularly in terms of stock trading.

"In gender-dominated environments, men have a tendency to show how hairy chested they are, compared with the man who's sitting next to them. I honestly think that there should never be too much testosterone in one room."

Brown himself has also taken a sticter stance toward banks. He, like Lagarde, backed an international bank tax.

Unlike Brown, however, Lagarde seems to understand that the best fix for the global economy is for sensible reform and regulation to begin within the board rooms of the institutions themselves. It's time for banks to cut back on their unsecured loans, cut back on the unjustifiably-lavish and self-serving compensation for their execs, and put sustainable profit at the forefront of their agendas.

As the mortgage crisis in the United States clearly demonstrates -- as banks took advantage of lax regulatory schemes put in place by George W Bush as a means to manage the impact of toxic loans mandated by the Bill Clinton administration -- no government can force financial institutions to regulate themselves, nor can they really do so in their place; those set on abusing the system for short-term and unsustainable profit will find a way.

It's hard to say whether David Cameron and George Osborne are correct and Christine Lagarde really is the best person for the job. But one thing remains abundantly clear: she's much better for it than Gordon Brown.

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