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Bye-bye, Stan . . . and Mike and Jack

Stanley Fischer's resignation from the International Monetary Fund last month - exactly one year after Horst Köhler became managing director - marks the end of an era in which the Fund became the world financial system's fire brigade.

Stanley Fischer's resignation from the International Monetary Fund last month - exactly one year after Horst Köhler became managing director - marks the end of an era in which the Fund became the world financial system's fire brigade.

By Deepak Gopinath
June 2001
Institutional Investor Magazine

Stanley Fischer's resignation from the International Monetary Fund last month - exactly one year after Horst Köhler became managing director - marks the end of an era in which the Fund became the world financial system's fire brigade. Along with Fischer, the IMF is losing two of its leading intellectual lights: Chief economist Mike Mussa resigned in April, and Jack Boorman, head of the influential policy review department, will leave by year-end.

During nearly seven years as the Fund's second-in-command, Fischer, 57, helped guide policy responses to financial crises while running day-to- day operations for former managing director Michel Camdessus. Big bailouts and micromanagement of national economic policies led to criticism of the IMF from both the left and the right. Nonetheless, Fischer, who formerly was an economics professor at MIT and chief economist at the World Bank, won accolades for his intellectual rigor, indefatigability and calm temperament.

The IMF's No. 2 spot is traditionally filled by an American who is replaced by each new White House administration. But that wasn't the case this time - the U.S. Treasury would have been happy to see Fischer stay on. "Everyone in this building, from the top down, had a lot of faith in his abilities," says a Treasury official. "It is rare to find his combination of talent and affability."

Fischer's departure was hastened by last year's messy process of choosing Camdessus' successor. While Germany and the U.S. fought over who should get the job, which traditionally goes to a European, Fischer served as acting managing director. African countries frustrated with the selection process nominated him for the top spot.

When Köhler finally came on board, he took steps to move the IMF in a new direction: Instead of bailing out and micromanaging troubled countries, the Fund will focus on preventing crises and promoting financial stability. To further his goals, Köhler set up a capital markets department that diminished the size and influence of Mussa's research department and Boorman's policy review department.

Fischer's stature suffered a blow in February when Turkey's currency collapsed. He had argued last fall that the peg would hold and supported a $10.4 billion, IMF-led package for the country in December. "Fischer was seen as backing a foreign exchange system that was not suitable for Turkey," says an IMF official. In April the Fund agreed to give Turkey an additional $8 billion to help restructure its banking system.

As of late last month, it was unclear who would fill the vacancies at the IMF. Tim Geithner, who was undersecretary for international affairs in the Clinton Treasury, had been mentioned as a possible successor to Fischer or Boorman, but his closeness to Larry Summers and the previous administration may prove a liability with the Bush team. Olivier Blanchard, head of the MIT economics department, recently turned down Mussa's job.

"The IMF is a very robust institution," says Charles Dallara, who heads the Institute of International Finance. "They have been three key leaders, but it is natural that there will be an evolution. It gives Köhler the opportunity to build a team of his own."