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PUSH TO ALTER BOARD MAKEUP
More power sought
for developing nations BY HOWARD SCHNEIDER
The Obama administration
has launched a battle to cut the numberofWestern Europeans on the board of the International Monetary Fund and make room for more representatives from de- veloping countries. Taking on a cluster of small
nations such as Belgium and the Netherlands, the administration has threatened to to let the board dissolve unless the Europeans give up two or three of the nine seats they hold. The U.S. appoin- tee to the IMF board, Meg Lund- sager, in August blocked a vote needed for new board elections, part of an effort to redistribute power within the IMF and, the administration says, sustain the agency’s credibility in newly in- fluential parts of the world. By most any reckoning, West-
ern Europe’s role is the global economy is not what it used to be. But the region accounts for more than a third of the board’s 24 seats, and several smaller Euro- pean countries argue that their presence on the board remains vital.
When the Soviet Union and
Warsaw Pact disintegrated, for example, Belgium took on a lead- ership role, representing some of the former Soviet states and some of the new Eastern European countries, such as the Czech Re- public. The Netherlands repre- sents a patchwork coalition that includes the broken-up bits of the former Yugoslavia and the former Soviet Union, as well as Israel, giving the Jewish state an IMF home other than with the Egyp- tian-led delegation of Arab states. While the overall management
of the fund has become more diverse over the years, it retains a heavily European slant. Along with the executive directors, three of the top seven staff mem- bers are from Western Europe, includingManaging Director Do- minique Strauss-Kahn.
‘Very unbalanced’ U.S. Treasury Secretary Timo-
thy F. Geithner, speaking at a congressional hearing last week, said the IMF “still has a very unbalanced governance struc- ture,” with Western European countries enjoying a “dispropor- tionate share” of spots on the executive board. The fight is of more than sym-
bolic importance. The agency is trying to repair relations with Asian countries strained a decade ago during that region’s financial
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U.S. calls IMF too Eurocentric U
THURSDAY, SEPTEMBER 23, 2010
10-YEAR TREASURY UP $1.40 PER $1,000, 2.56% YIELD
CURRENCIES $1 = 84.54 YEN; EURO = $1.339
DIGEST CONSUMERSAFETY
Bug contamination sparks baby formula recall Drugmaker Abbott Laborato-
ries saidWednesday it is recalling millions of containers of its best- selling Similac infant formula that could be contaminated with insect parts. The voluntary action affects up
to 5 million Similac-brand pow- der formulas sold in the United States, Puerto Rico, Guam and some Caribbean countries. The company said the products may contain a small beetle or larvae, which could cause stomachache and digestion problems. The recall does not affect any
liquid formulas or other Abbott- brand products. Company spokeswomanMelis-
sa Brotz said Abbott discovered the insects last week in one sec- tion of aMichiganmanufacturing plant. Abbott manufactures Simi- lac at severalU.S. sites.
ALSOINBUSINESS JOHN THYS/AGENCE FRANCE-PRESSE VIA GETTY IMAGES
crisis. It also is expected to playan expanded role in helping manage the global economy after the re- cent crisis — goals that require it to build supportamongthe devel- oping nations expected to fuel global growth. The dispute has raised some
related questions about the fu- ture management of both the IMF and theWorld Bank. European officials have argued
that if they give up executive-di- rector seats, the United States should relinquish the effective veto it has over some IMF deci- sions and set aside the long- standing agreement under which the managing director of the IMF is chosen from Europe and the president of theWorld Bank is an American. In a more multilateral world, they argue, the jobs should be open to anyone, something the United States, as the top donor to both organizations, has not yet accepted. “It is not unreasonable to look
for change, and people don’t ob- ject, but these are big steps,” said one European director, who like others interviewed would not speak publicly, because of the sensitivities involved. For instance, Turkey, now rep- resented by far smaller Belgium, could win a place at the table by virtue of its status as a prominent emerging market. But other Eu- ropean countries might balk at being represented by Turkey. Poland, a significant economy
in Eastern Europe, is another country that could stand to win a seat, according to several direc- tors. Sub-Saharan Africa, which now shares two executive board members among more than 40 countries, could gain a third.
Jean-Claude Trichet, left, European Central Bank chief, with Belgian FinanceMinister Didier Reynders. At one level, individual liveli-
hoods are at stake, withEuropean officials discussing who among them might be asked to give up their $248,000-a-year job. But in the IMF’s peculiar version of geo- politics, it also affects how whole regions of the world will be repre- sented.
Where the power lies All 187 IMF member countries
appoint a representative to the agency’s board of governors, but that large body meets only occa- sionallyandhas limited influence over policies, management and lending decisions. Power largely rests with the much smaller exec- utive board, whose two dozen members serve inWashington on a full-time basis. Fivenationsweregiven perma-
nent spots on the executive board when the fund was established after World War II, and that group has been largely un- changed — the United States, Germany, France, Britain and Ja- pan. Three others, by virtue of their size or role in the global economy, send executive direc- tors who represent their nation alone: China, Russia and Saudi Arabia. The other 179 members com-
pete for 16 remaining board seats in an internal election that forces them to build coalitions and choose who in the grouping will take the executive director’s job. These “affinity groups,” as IMF historian James Boughton calls them, often are based on shared traits such as geography or lan- guage. But politics shapes the coali-
tions as well, allowing an Asian nation such as East Timor to be
Brotz said the company has
been consulting with the Food and Drug Administration, which determined there was no “imme- diate health risk” from the con- tamination. The affected products were
sold in plastic containers and in cans of various sizes, including 8-ounce, 12.4-ounce and 12.9- ounce. The company has set up a Web site,
http://similac.com/re- call,andaconsumerhotline,800- 986-8850. Consumers can enter container lot numbers online to determine whether they have products that are subject to the recall. The products should be returned to Abbott for a refund. Abbott expects to lose $100
million in connection with the recall.
—Associated Press
comfortably represented by Italy instead of being left in group that includes East Timor’s former rul- er, Indonesia. Executive directors would not
speak publicly about the issue, but several from Europe argued privately that the United States was disrupting a system that has worked reasonably well. While the board may not be representa- tive on a global scale, directors argue that the existing system allowed theIMFto absorb dozens of new members in the early 1990s and accommodate a host of regional and political sensitivi- ties. If there are problems, they
argue, they should be self-correct- ing. Countries could form differ- ent coalitions if they don’t feel well represented, they say, and the IMF’s formulas for distribut- ing voting shares among coun- tries should gradually reflect the growing clout of emerging-mar- ket nations — with no need to barter over the outcome of the internal elections. To advocates for change, how-
ever, the outcome should be obvi- ous.
“Major changes are underway
in the global economy,” with Asia leading the global recovery and both population and economic growth in Europe at tepid levels, said Amr Battacharya, director of the Group of 24, a coalition of finance ministers from develop- ing countries. “The issue is where within the developed world should the adjustment take place, and when you look relative to the world economy — population, other indicators — the spotlight really is on Europe.”
schneiderh@washpost.com
GMsharesmust sell at $134 for U.S. to break even
Some fear investment can’t be recouped, but analyst is optimistic
BY PETERWHORISKEY Inorder for theUnitedStates to
recoup all of its $50 billion invest- ment in General Motors, it must sell its ownership stake at $134 a share, according to the special in- spector general of the govern- ment’s bailoutprograms. The estimate comesas theauto-
maker readies itself for a public stockoffering, settingthestagefor the government towithdrawfrom itsmajority stake inthe company. The price needed for a full re- coveryof theU.S. investment is far
higher than shares of the auto- maker have ever reached, and some analysts andgovernmentof- ficials have expressed doubts that the United States will be able to recover themoney. ButwithGMturning a profit in
recent quarters, someWall Street analysts have lauded the compa- ny’s prospects, noting that it has shed much of its debt, discontin- ued brands, closed plants and slashed its workforce. As a result, it is much better prepared to weather a slow economy — and couldbeveryprofitablewhenauto sales reach pre-recession levels, the analystshave said. Lastweek, in fact,Morningstar
analyst David Whiston issued a preliminary estimate setting the shares’ fair value at$134. “GM’s cost structure is drasti-
cally improved,”Whistonwrote in a Sept. 13 note to investors. “We think GM’s earning potential is excellent because it finally has a healthy North American unit and can focus itsmarketing efforts on just four brands instead of eight. . . .We think it is critical for inves- tors to know that GMnowmakes excellent car models as well as light trucks.” After the $50 billion invest-
ment in GM, the United States helda61 percent stake inthe com- pany, as well as $2.1 billion in preferred stock and a $6.7 billion loan. The loan has been repaid, and whether the government can recoup its investment depends largely onthe shareprice. Thegovernment’sestimatethat
the shares would need to sell for $134 came fromNeilM. Barofsky,
special inspector general for the Troubled Assets Relief Program, ina recent letter to Sen.CharlesE. Grassley (R-Iowa). News of the estimate came as it
was announced that Herbert M. Allison Jr., the Treasury official who has administered TARP, would be resigning. Allison had previously served as president of MerrillLynchandTIAA-CREF. “The fact that TARP is now re-
garded bymany experts as one of themost effective emergency pro- grams in financial history is a di- rect result of Herb’s leadership and all of your hard work,” Trea- sury Secretary Timothy F. Geith- ner said. “This is not just our pro- gram to eulogize. The Bush ad- ministration started the job. We finishedit.”
whoriskeyp@washpost.com
ASSOCIATED PRESS
Consumer protection adviser ElizabethWarren said her job will include trying to “level the playing field” among lenders.
l Facebook resolves Canada’s privacy concerns: Canada’s pri- vacy commissioner Jennifer Stod- dart said Wednesday that Face- book has addressed concerns raised a year ago over third-party access to users’ information. A main concern had been that, under the social network’s earlier settings, users who wanted to play games or access other out- side applications had to make all their information available to third parties. Facebook has since changed its policy to require ap- plications to tell users what parts of their profile they want to ac- cess and request permission to do so. lWarren seeks equal footing for small lenders: Consumer pro- tection special adviser Elizabeth Warren said part of her job will be to create a set of rules not just for
consumers, but for small lenders to compete against big banks. “We’ve got folks who want to play by a clean set of rules competing against folks who don’t,” Warren said Wednesday in a speech to a meeting of the National Associa- tion of Federal Credit Unions in Washington. “The job of regula- tion is not only to level the playing field between consumers and the lender, it’s often to level the play- ing field among the lenders so that everybody is competing on a straight-up basis.” The speech was her first since President Obama named the Harvard Law professor to help build the new Consumer Financial Protection Bureau, which will have broad oversight of consumer credit products, including mortgages and credit cards. —From news services
Post Tech CECILIA KANG Excerpt from
voices.washingtonpost.com/posttech
FCCprobes cartoonfeaturingSkechers TheFederalCommunicationsCommissionlaunchedareview
Wednesdayintowhetheratelevisioncartoonfeaturingcharacters thatalso advertiseSkechers shoesviolates rules limitingcommercials tochildren. “Zevo-3,” aprogram-lengthseries to beginairingOct. 11 on
Nicktoons, features three superheroes fromcomics andtelevisionads usedby Skechers.CharactersKewlBreeze,Z-StrapandElastika are also thenames for shoe lines soldby Skechers andamount toprogram- lengthadvertisements for the company, according to a complaint filed by theCampaignfor aCommercial-FreeChildhood. TheFCCsaiditwouldtakepublic comments onthe complaint to
determinewhether the series violates theChildren’sTelevisionAct and agency rules that limit advertising inchildren’sprogramming.The Campaignfor aCommercial-FreeChildhoodfiledapetitionlastmonth to the agency, saying theprogramwouldbe the first children’s show featuring characters only knownpreviously asmarketing agents. “It’s clear that Skechers andNicktoons are flouting thepolicies
establishedbyCongress toprotect childrenfromexcessive commercialism,” saidCCFC’sdirector, SusanLinn. “‘Zevo-3’ is a 22- minute commercialmasquerading as a kids’TVshow.” Skechersdidnot immediately respondto a request for comment. CCFCsaidthatwhile “Zevo-3’s” creatorshavepromisedthe show
won’thaveproductplacements, it is concernedabout the associationof the comicswiththe show. Inone comic, childrendefeat anevil character,Dr. Stankfoot, afterheroKewlBreeze gives themSkechers Airators,whichare saidto combat foot odor.
The greatest luxury in lifeistime.Savour everysecond.
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