Monday, April 16, 2007

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Will Paul Wolfowitz stay or go?

From the World Bank's Development Committee communique:

We have to ensure that the Bank can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff. The current situation is of great concern to all of us. We endorse the Board's actions in looking into this matter and we asked it to complete its work. We expect the Bank to adhere to a high standard of internal governance.
What exactly is "the current situation"? Let's go to Sebastian Mallaby:
The scandal centers on the pay of people around Paul Wolfowitz, the World Bank president. Kevin Kellems, an unremarkable press-officer-cum-aide who had previously worked for Wolfowitz at the Pentagon, pulls down $240,000 tax-free -- the low end of the salary scale for World Bank vice presidents, who typically have PhDs and 25 years of development experience. Robin Cleveland, who also parachuted in with Wolfowitz, gets $250,000 and a free pass from the IRS, far more than her rank justifies. Kellems and Cleveland have contracts that don't expire when Wolfowitz's term is up. They have been granted quasi-tenure.

Then there is the matter of Shaha Riza, a long-standing bank official who is Wolfowitz's romantic partner. She went on paid leave (seconded to the State Department) after Wolfowitz arrived; her salary has since jumped from $133,000 to $194,000. When questions were first asked about Riza's rewards, a spokesman declared that the matter had been handled by the bank's board and general counsel, implying that the bank president himself had not been responsible. But the truth was that Wolfowitz had been closely involved, as a contrite Wolfowitz admitted yesterday.

Treating an anti-poverty institution this way would look bad under any circumstances. But the scandal is especially damaging to Wolfowitz because his leadership had generated questions already. He has alienated the staff by concentrating too much power in the hands of Kellems and the abrasive Cleveland; he has alienated shareholders by presenting half-baked strategy ideas; he has alienated borrowers by blocking loans, sometimes capriciously. Moreover, Wolfowitz has made the battle against corruption his signature issue. He of all people should have thought twice before sanctioning exorbitant pay for his entourage.

In context, the Development Committee statement is pretty damning. The New York Times' Steven Weisman explains:
Though the language was indirect, the message it sent was unmistakable, according to officials who have been meeting in Washington the last few days. “Words like ‘concerned,’ ‘credibility’ and ‘reputation’ are pretty unprecedented for a communiqué from a place like the World Bank,” said an official involved in the drafting of the statement.

At issue in these statements was a crisis arising from Mr. Wolfowitz’s involvement in decisions to transfer his companion, Shaha Ali Riza, to a new job and give her a raise.

Officially, Mr. Wolfowitz and the bank are now to wait for a full report by the bank’s board on his leadership and charges of favoritism in dealing with Ms. Riza, who was employed at the bank until 2005. But bank officials said that in delaying a finding, the board seemed to be buying time for Mr. Wolfowitz to consider resigning.

European officials close to the bank said that if anything, Mr. Wolfowitz’s apparent dismissal of the criticism on Sunday would increase the determination of the wealthy European donor nations of the bank — especially Britain, France and Germany — that he needed to step aside for the good of the bank....

“We have not heard anything that will change our minds,” said April Cave, chairwoman of the association that represents most of the bank’s 7,000 employees in Washington. “He has apologized, but he hasn’t shown how he can restore trust at the bank.”

It should be noted that Wolfowitz has his supporters among African representatives. And lord knows the Bank does not have completely clean hands when it comes to corruption. As the Economist points out, the Bank's ethics board is complicit in giving Wolfowitz the ability to transfer Riza. Click here for Wolfowitz's own explanation. [UPDATE: The Wall Street Journal has an editorial that makes these points even more forcefully.]

In theory, I suppose Wolfowitz can try to ride out the media storm. In practice, I don't see how he can continue when he's alienated both the Bank staff and powerful donor countries.

Question to readers -- who leaves first, Wolfowitz or Alberto Gonzales?

posted by Dan on 04.16.07 at 12:20 AM


I don't know enough about World Bank politics but I don't see Gonzales leaving. In his case, if he can give a decent performance before the Senate, he will most likely weather the storm. Dan once again don't you think it is time that you changed your bio to reflect the fact that you are no longer a Republican?

posted by: Ian on 04.16.07 at 12:20 AM [permalink]

Who pays Riza's salary? State Department or World Bank?

posted by: Thomas Esmond Knox on 04.16.07 at 12:20 AM [permalink]

Does it matter?

posted by: Roland on 04.16.07 at 12:20 AM [permalink]

Having read the WSJ this morning it shouldn't be Wolfowitz. It sounds like he did all the right things, advised the bank of his relationship before he took the job, recused himself from any decision making about the individual, and then got sandbaged for forwarding the Ethics Committe report to Wold Bank (becasue the Ethics Committe didn't have the standing to do that) Sounds like real brass knuckle politics to me

posted by: FDF on 04.16.07 at 12:20 AM [permalink]

Having read the WSJ this morning it shouldn't be Wolfowitz. It sounds like he did all the right things, advised the bank of his relationship before he took the job, recused himself from any decision making about the individual, and then got sandbaged for forwarding the Ethics Committe report to Wold Bank (becasue the Ethics Committe didn't have the standing to do that) Sounds like real brass knuckle politics to me

posted by: FDF on 04.16.07 at 12:20 AM [permalink]

Wolfie should be sent to Iraq, he wanted that war so badly.

Both should go, Ganzalez first probably.

posted by: save_the_rustbelt on 04.16.07 at 12:20 AM [permalink]

The lesson is that if you are a person who is determined to perform unpopular reforms, avoid even the appearence of the appearance of impropriety. Or maybe it's a simpler thing -- don't seek a job at the place where your significant other is working.

If Wolfie were more of a go-along kind of guy, he would survive this. As he is an architect of the Iraq War, without a backer at his workplace, he's doomed. He'll go first, but he may make it expensive for the World Bank.

posted by: Appalled Moderate on 04.16.07 at 12:20 AM [permalink]

Daniel, I'm going to guess that you wrote this article before the WSJ article came out. In light of the WSJ article's claims, have you changed your views in any way?

posted by: Andrew Berman on 04.16.07 at 12:20 AM [permalink]

I would echo that last comment/question - When you said the WSJ 'makes these points more forcefully,' I thought I would get a similar account like what I get from reading your snippets and links, with a little more emphasis on larger Bank failures. Meanwhile, the Journal makes some good points, but basically produces paranoid shoutings and a bad, unbalanced piece. I realize it's the WSJ and it's their op-ed and that there is good reason for conspiracy theories, but the 'internationa satrapies'and 'Euro-bureacracy-midea putch' is ridiculous crap that weakens whatever the editorial was trying to pull-off.

posted by: Drew on 04.16.07 at 12:20 AM [permalink]

Ian, a half dozen Republican Congressman have already called for Gonzales to resign. The National Review is calling on him to resign. The support that does exist for him -- apart from the President himself and perhaps Senator Hatch -- is remarkably tepid. Dan is acknowledging reality.

posted by: Crust on 04.16.07 at 12:20 AM [permalink]

Maybe they could platoon at the 'War Czar' spot.

posted by: Mitchell Young on 04.16.07 at 12:20 AM [permalink]

Bill raised the bar on when you have to go. Both these items are below his level. No controlling authority.

posted by: Huggy on 04.16.07 at 12:20 AM [permalink]

If Wolfowitz really believes in his anti-corruption stance, then he should resign before Gonzalez goes before the Congress. Of course, the mere fact of this scandal indicates he is at least willing to make a personal exception for himself.

Further, Wolfowitz must realize how badly his relationship with the "rank and file" of the World Bank will poison anything he does going forward. If he has any confidence in a possible successor, he should step aside now for the good of the institution.

posted by: Erasmus on 04.16.07 at 12:20 AM [permalink]

After reading the WSJ this morning, it's clear that, to any fair minded person who knows all the facts, Wolfowitz didn't even do anything that would have the APPEARANCE of corruption or impropriety.

If Wolfowitz resigns over this, it will be a sad, sad day.

posted by: A.S. on 04.16.07 at 12:20 AM [permalink]

To any fair-minded person who reads the WSJ editorial page and knows to get his information only from that source it may well be clear that Mr. Wolfowitz did nothing that would have the appearance of corruption or impropriety.

I must say it is refreshing, in a way, that such people are again commenting on Dan's blog. It would be a real shame if the overweening sense of personal entitlement so prevalent in Washington and especially so among President Bush's closest associates had no overt, unapologetic defenders here. There are obviously two sides to any discussion of whether it is appropriate for the American head of a prestigious internation institution to be forced to forego a professional relationship with his -- what should we call her -- love interest and then arranging for this woman, who is not even an American, to be assigned a makework job in our State Department, reporting until recently to the Vice President's daughter, at a substantially increased salary.

I'm all for people who think this kind of thing is good and right expressing their conviction here with all the passion they have in them.

posted by: Zathras on 04.16.07 at 12:20 AM [permalink]

Couple of reactions to Dan and commenters.

1. I'd bet that Wolfowitz resigns before Gonzales does.

2. The World Bank pays Riza's salary while she is working at the State Department. The income is tax free.

3. In order to be successful as the president of the World Bank, you have to have the people in the building behind you. The staff really dislikes Wolfowitz and they always have. This was clear long before any of the current kerfuffle started. Surveys of the staff in 2006 revealed a lack of confidence in his leadership and despite a variety of efforts, he has failed to get them on board. The staff grumbled about Wolfehnson when he was the president, but now remember him in glowing terms by comparison.

4. Of course, the biggest problem is not the staff, but the member governments. Wolfowitz got roughed up earlier this month when the Board (unanimously) revised the rules about suspending borrowers. This was a response to Wolfowitz's earlier decisions to suspend projects unilaterally. Ultimate authority is held by a winning coalition on the Board, not by the president. The vote earlier this month made that crystal clear if the Articles of Agreement were not enough.

5. I don't know what will happen, but if I had to bet, I'd bet that the member governments will use the current crisis as an excuse to get rid of an ineffectual president. They know he is a lame duck anyway and won't get his term renewed no matter who wins the U.S. presidential election in 2008. So, I'd say there is a better than 50-50 chance that Wolfowitz is gone within two weeks.

6. One thing that might help Wolfowitz to keep his job is the fact that the Europeans really don't want to have a debate about the selection process for the World Bank president. This came up a few years ago when Asian and developing country members argued that the norm of picking only from American nominees would limit the range of possible candidates so much that it would be difficult to find a high quality president who could get things done in a challenging environment. That argument doesn't seem so silly right now. The Europeans like the current arrangement since the Americans get to pick the WB President and in return they get to pick the leader of the IMF. If Wolfowitz gets booted, that debate will re-open with a vengeance.

posted by: Mike Tierney on 04.16.07 at 12:20 AM [permalink]

My guess is that Wolfowitz goes first, for the simple reason that sex scandals trump real scandals in the American imagination. I'd rather see it the other way around, but there you go.

posted by: Decline and Fall on 04.16.07 at 12:20 AM [permalink]

What if the World Bank gets the boot instead?

posted by: Huggy on 04.16.07 at 12:20 AM [permalink]

Kind of incredible there are still tub-thumping apologists for this regime. I say Wolfie goes first, only because of who writes his paycheck. Almost every non-American in a position of power at the World Bank has a reason to get rid of him -- people who specifically can't take any more of the Bushies, people who simply hate America, people who still genuinely value accountability -- and sooner or later they'll form an alliance. In contrast, the AG's bosses should be just delighted with him; he's supine, crooked and a borderline fascist who puts Bush ahead of God and country. So he won't go unless by some fluke Congress impeaches him.

I'd like to see, just once, someone from the right -- better yet, make that specifically a long-term Republican -- pointing out that the GOP has jumped the shark from conservatism to fascism and that something needs to be done about it for the sake of our freedom, for the sake of our democracy or at least what's left of it. Right now, excepting Bob Barr and a handful of cohorts, the right in this country falls into two camps -- loyal Bushies and people who for whatever reason can't bring themselves to speak out.

posted by: Gen X on 04.16.07 at 12:20 AM [permalink]

Couple of ways to interpret Dan's question:

1) Who will leave first? As a previous poster pointed out, we Americans prefer to focus on sex scandals while ignoring real scandals, so I think Wolfowitz will be first. That said, my vote is for Gonzales. There is far more substance behind his misdeeds / mismanagement / incompetence than behind anything Wolfowitz has done.

2) Who should leave first? On this question, my preference would be for the two gents to reserve a booth at The Old Ebbitt for lunch tomorrow, right after their respective press conferences announcing their resignations. In other words, don't either of them let the door hit them in the ass on the way out.


posted by: Rofe on 04.16.07 at 12:20 AM [permalink]

After reading the WSJ this morning, it's clear that, to any fair minded person who knows all the facts...

It is a sad, sad day when someone who has read only the WSJ opinion page feels that they 'know all the facts'. Even if you're biased in their direction, recognize that propaganda from one side is *never* likely to contain 'all the facts'.

The WSJ opinion blames in part "Europeans who want the bank presidency to go to one of their own". No Fing way does that happen- they already get the IMF. The only way they get the Bank is if they whole schmeer is revisited, and I don't see how that does Europe a lot of good. This kind of thinking displays the factless paranoia of the WSJ op-ed page.

Finally, for my money Wolfie goes before Gonzo. There's no real reason to keep him there (he was never qualified for the post & has not distinguished himself or won the staff over), whereas Gonzo will be kept on until the storm is over or until there's a useful opportunity for throwing him overboard (eg distracting from worse news). A replacement AG is going to have to go through Senate confirmation, so Bush will delay until inevitability.

posted by: Carleton Wu on 04.16.07 at 12:20 AM [permalink]

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