Bloomberg News
WASHINGTON - The International Monetary Fund and World Bank should use their authority and economic expertise to improve the functioning of financial systems in crisis-prone countries instead of lending money after a crisis hits, Andrew Crockett, general manager of the Bank for International Settlements, said Monday.
Mr. Crockett said that rules, not emergency lending, will more effectively ease the impact of future economic meltdowns.
"My hope," he said, "is that if the systems are in place, there will be more stabilizing flows that will naturally follow" if foreign investors pull out in a rush as they did from parts of Asia, Russia, and Brazil in 1997 and 1998.
Mr. Crockett's call for the IMF and World Bank to get out of the business of lending comes as both institutions are under fire from critics, ranging from members of Congress to protesters who last month tried to block IMF and World Bank joint meetings here.
Treasury Secretary Lawrence Summers is among those calling for the IMF to stop lending long-term, and only lend to stem a crisis. The IMF now lends to half the world's countries.
Mr. Crockett, a former head of research at the IMF, said the Bretton Woods agreement that led to the creation of the IMF, World Bank, and World Trade Organization is outdated because financial markets - not intergovernmental agreements - now set the rules.
