The managing director of the International Monetary Fund created a stir earlier this week when he suggested in an interview that, "the need for public intervention is becoming more evident to deal with the mounting international economic crisis that centers on subprime mortgages. But when pressed on precisely what he meant during the IMF/World Bank Spring Meeting in Washington, Dominique Strauss-Kahn would not elaborate.
"Let me share with you a quote from [former Federal Reserve Board Chairman] Alan Greenspan," Strauss-Kahn told me on Saturday, when I asked about his controversial "public intervention" comment to the Financial Times a week earlier, "’If you understand what I say, then I didn’t express myself correctly." (A little French self-parody?)
During a briefing for reporters at the Saturday session of the IMF/World Bank conclave, I had asked whether the onetime French presidential hopeful had meant in his FT interview a worldwide effort to bolster the British rescue of Northern Rock and the U.S. bailout of Bear-Stearns. My question came as a followup to a query from an FT reporter about his "public intervention" remarks and why it was not mention in the communique following Strauss-Kahn’s closed-door meeting with finance ministers and bank governors attending the meeting.
But the suave economist and former Socialist finance minister known throughout his country as "DSK" wasn’t taking the bait from my colleague or me.
"Don’t look–you won’t find it [in the communique]," shot back Strauss-Kahn, He added that housing prices are still falling and the housing market analysis is bleak and that any response to it "has to be done by government." However, the IMF chief concluded, "I won’t say any more."
At the gaggle (early morning press briefing) at the White House, I read the IMF chief’s "public intervention" comment to Press Secretary Dana Perino. She said she had not read it, and then offered a spirited defense of the President’s policy on the subprime crisis to provide help to those who are truly in a bad situation but not those who simply made a bad investment. (Later, Perino’s office contacted me to let me know they were not going to comment on Strauss-Kahn’s remarks).
Last year, "DSK" placed second in a five-candidate race for the Socialist nomination for President of France that was won by Segolene Royal. She went on to lose to center-right candidate, Nicholas Sarkozy, who stunned much of the European political community by recommending Strauss-Kahn for the IMF directorship. This meeting is the Frenchman’s first since assuming that position late last year.
Redwood Dissents From DSK
One who took sharp exception with Strauss-Kahn on his controversial statement was John Redwood, British Member of Parliament and one of the Conservative Party’s premier authorities on economics and nationalization.
In response to an e-mail I sent regarding the IMF chief’s comments, Redwood replied: "I am strongly against the current syllogism: ‘Banking has been a strongly regulated industry. Banking has got into substantial difficulties. Therefore we need more regulation."
Regarding the comment on "public intervention" coming from the managing director of the IMF, Redwood noted: "The IMF concluded in July of ’06 when reviewing the USA that ‘systemic risks were at a low ebb.’ And the regulators on both sides of the Atlantic implemented the Basel I controls, which positively encouraged banks to push obligations off their balance sheets."
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