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Trump risks revolt with controversial World Bank pick

US Treasury official David Malpass has been highly critical of institutions like the World Bank, calling their lending “corrupt” – GETTY/AFP-File 

WASHINGTON, United States, Feb 5 – US President Donald Trump is due on Wednesday to unveil a controversial candidate to lead the World Bank, a choice that could spark a revolt against US dominance of the institution.

The White House has confirmed to fellow Group of Seven nations that Trump will nominate US Treasury official David Malpass, a person familiar with the matter told AFP, intending to maintain US control of one of the leading global bodies.

The Washington-based lending institution has been led by an American since the bank’s founding in the aftermath of World War II, while its sister institution, the International Monetary Fund, has always been led by a European.

In recent years, the growing emerging market countries have challenged this unwritten arrangement, demanding a more open, merit-based selection process.

Experts had thought it unlikely those countries would join forces against the US candidate but agreed they might react more strongly to Malpass, a strident critic of the World Bank and IMF who has called their lending “corrupt.”

Malpass’s nomination, scheduled to be announced at 1630 GMT on Wednesday, would follow a Trump administration pattern of appointing the avowed political opponents of government institutions — such as key environmental and financial regulators — as their chief executives.

In one example, a Senate committee on Tuesday advanced Trump’s nomination of former coal lobbyist Andrew Wheeler to lead the Environmental Protection Agency, replacing Scott Pruitt, who resigned last year under a cloud of ethics investigations but who had forged a reputation by repeatedly suing the EPA itself.

‘Toxic choice’

Many, including former Treasury officials from both political parties, have sharply criticized Malpass and his qualifications, pointing to his failure to foresee the global financial crisis and opposition, which later proved unjustified, to Federal Reserve policies.

“David Malpass would be a disastrous, toxic choice for World Bank president,” said Tony Fratto, former Treasury assistant secretary in the George W. Bush administration.

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Malpass, currently US Treasury undersecretary for international affairs, has sharply criticized the World Bank for continuing to lend to China and other relatively well-off countries.

And in testimony before Congress in November 2017, he said the World Bank and IMF were “often corrupt in their lending practices and they don’t get the benefit to the actual people in the countries.”

Malpass was chief economist at the former investment bank Bear Stearns from 1993 until it collapsed in 2008 at the start of the global financial crisis and ran unsuccessfully for the Senate before serving on Trump’s transition team.

But last year he led negotiations that ended with a “historic” increase in the bank’s lending capital by $13 billion, after shareholders agreed to a reform package that curbs loans and charges more for higher income countries like China.

Former Nigerian Finance Minister Ngozi Okonjo-Iweala, left, said to have been one potential US nominee for World Bank president, seen here with IMF chief Christine Lagarde /AFP-File

Scott Morris, a former official in Barack Obama’s Treasury who managed relations with the World Bank, said Malpass would have difficulty convincing shareholders to look past his statements.

“It’s fully within their ability to block an unsuitable nominee,” Morris said in a statement.

The surprise early departure of World Bank President Jim Yong Kim, effective February 1, not even halfway through his second five-year term, allows Trump to weigh in on his successor.

After reshaping the US presidency, traditional alliances, trade relations and the US Supreme Court, Trump could now have a chance to influence how countries like China access concessional lending.

The bank’s board will accept nominations from February 7 through March 14, and plans to name a new president prior the IMF and World Bank Spring meetings, set for April 12-14 in Washington. Any of the 189 members can propose a candidate.

The United States is the biggest shareholder in the World Bank but does not have a veto and needs the backing of European nations in a simple majority vote by the board.

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Eroding credibility?

However, if Europe were to oppose the US selection, it would tacitly be giving up leadership of the far more prominent IMF once its current chief Christine Lagarde departs.

And that is something experts say will be difficult to achieve.

Former Pepsi CEO Indra Nooyi was another potential candidate to run the World Bank © GETTY/AFP-File 

Mark Sobel, who had a long career with the US Treasury Department and oversaw relations with the IMF, and who overlapped with Malpass at Treasury, declined to comment on the choice.

However, he cautioned that failure to name a “credible” candidate could unite World Bank members to oppose the US choice, especially if that choice is “a person seen as hostile to the institution.”

He has called for an end to the tradition of Americans and Europeans leading the two primary global lending institutions.

“I also think that ultimately institutions are better served by having a credible person running them regardless of their nationality,” Sobel told AFP.

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