Wolfowitz Dead in the Water

Here’s a communique (posted about 9 pm) from Peter Bakvis of the Global Unions office in Washington who has been closely observing this fiasco. One wonders if Canada is caving along with the Bushies or will stand as the last defenders of this nepotistic ultra neo con.., (And you read it here first — was it a coincidence that Paul Martin gave a speech on global economic governance at Queen’s U two weeks ago? Will a Canadian ex PM neo con ‘ligh’t be the compromise choice between US and Europe? 

Colleagues,

Some details of the deal being negotiated between Paul Wolfowitz and the World Bank board for the former’s immediate departure appear in a Washington Post article posted an hour ago. According to the Post, “the board dismissed a proposal floated by the Bush administration aimed at finding Wolfowitz a face-saving way out … While the bank’s executive board might have once been friendly to a negotiated outcome along the lines the Bush administration has proposed, that window closed with the completion of the committee’s report, senior officials said.”

The Bush proposal involved a reprimand and a “voluntary” resignation followed by the US naming a successor, rather than an overt dismissal. The Bank’s board rejected the proposal. 

By letting the affair drag out for six weeks, Wolfowitz and his neo-conservative Bush administration allies essentially threw away all their bargaining chips, and have severely undermined the unwritten prerogative of the US, which has existed since 1944, to name the president to the World Bank.

Wolfowitz forced the Bank to undertake a full enquiry, which revealed a number of previously unknown unsavoury details about his ethical lapses. These include the fact that he not only lied to the Bank’s board and the public about having properly informed the Bank’s legal department and ethics committee about the favoured treatment he accorded his Bank employee girlfriend, but he had manoeuvred to deliberately conceal the arrangement from these officials.

An earlier article from the FT (copied below), citing Bush administration sources, throws light on the mentality that led to Wolfowitz and the Bush administration seemingly shooting themselves in the foot on this matter. On the one hand, administration pragmatists such as treasury secretary Hank Paulson argued for an early negotiated departure of Wolfowitz to protect the US “right” to name the Bank’s president and to “set the agenda” at the Bank.

On the other, “Dick Cheney, the vice-president, and Karl Rove, who is Mr Bush’s senior strategist, say the president should remain loyal to Mr Wolfowitz in the teeth of what they see as a European campaign to take revenge for the World Bank president’s pivotal role in pushing for the 2003 invasion of Iraq. They have scant interest in the health of ‘multilateral institutions like the World Bank’, said the insider.”

Peter Bakvis

ITUC/Global Unions – Washington Office

888 16th Street NW

Washington, DC 20006

Phone: 202-974-8120

Fax: 202-974-8122

E-mail: pbakvis@earthlink.net

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Bank Board Negotiating Resignation of Wolfowitz
By Peter S. Goodman and Karen DeYoung
Washington Post Staff Writers
Wednesday, May 16, 2007; 4:40 PM

The World Bank’s executive board is negotiating the resignation of embattled President Paul D. Wolfowitz, senior bank officials said this afternoon.

The sources said that under the terms being discussed, Wolfowitz would step down, ending the ethics controversy that has consumed the bank for weeks, while the board would credit him for some achievements as president of the global poverty-fighting institution, including a sharpened focus on aiding Africa and stemming corruption.

A senior bank official who spoke on condition of anonymity, citing the sensitivity of the talks, said the Bush administration was helping broker the terms and was eager to see the matter resolved swiftly. Under the terms of Wolfowitz’s contract, signed two years ago, he would receive a full year’s salary — more than $375,000 — if he steps down or is fired by the board. Earlier, the board dismissed a proposal floated by the Bush administration aimed at finding Wolfowitz a face-saving way out, according to senior officials at the bank.

The proposal, pressed with foreign finance ministers by Treasury Secretary Henry M. Paulson Jr., would have had the bank’s board reprimand but not fire Wolfowitz for engineering and covering up a substantial raise for his girlfriend, with the bank expressly sharing some of the blame for the ethics controversy. Following that, the Bush administration would have agreed to replace Wolfowitz, said administration sources who spoke on condition they not be named.

But the board rejected that formulation in discussions last night and today, the sources said. The board is deliberating over a report by an investigating committee that finds Wolfowitz breached his contract, broke ethics rules and undermined the reputation of the bank. The board’s leadership was hoping to resolve the matter and take action — perhaps declaring a lack of confidence in Wolfowitz or even firing him — by the end of today.

But the board adjourned just before noon at the request of the American executive director, said an official briefed by a European board member, who spoke on condition of anonymity. An American spokeswoman declined to provide the reason for the request, but a bank official said the United States had asked for time to consider its options. A senior Bush administration official later said the United States had requested the delay to allow Wolfowitz to step down, pre-empting the board’s action against him.

The Bush administration appeared to be virtually alone in supporting Wolfowitz. Nearly all board members have endorsed the findings of the committee’s report, officials said, with even Canada — traditionally a reliable U.S. ally — breaking with the Bush administration. A spokesman for Canadian Finance Minister Jim Flaherty declined to discuss internal board deliberations, saying, “Our position has not changed. . . . We want to see the process completed.” Japan, another stalwart friend of the United States, was wavering earlier today, said an administration source.

Meanwhile, signs mounted that Wolfowitz, isolated and under fire, has already lost his ability to lead the institution. Germany’s development minister today effectively disinvited Wolfowitz to a meeting scheduled next week in Berlin to discuss Africa. Asked specifically whether Wolfowitz would attend, the German minister, Heidemarie Wieczorek-Zeul, said: “I would not advise him to do so,” adding that he “would do a good service to the bank if he were to resign.”

Wolfowitz has apparently scrapped a trip to Slovenia, where he was scheduled to attend another development event tomorrow. Originally, he was to deliver an award to graduate students who penned essays exploring the troubles of corruption in the developing world, bank officials said.

White House support for Wolfowitz continued to soften. A day after telling reporters that all options were open for discussion in terms of the bank’s future leadership, White House spokesman Tony Snow today called the ongoing crisis a “bruising episode” for the institution. “What you have to do is figure out a way forward to maintain the integrity of the institution,” Snow said. “And, therefore, when you do it, you’re going to discuss everything. That’s what you would normally do.”

While the bank’s executive board might have once been friendly to a negotiated outcome along the lines the Bush administration has proposed, that window closed with the completion of the committee’s report, senior officials said. The report accuses Wolfowitz of a range of ethics breaches and directs the board to consider whether he can continue to lead the bank.

One official who has been briefed by a European member of the board said the Bush administration proposal was deemed offensive by several members. “The staff were absolutely horrified by what seemed to be the Bush administration’s disdain for a clear-cut case of corruption at the bank,” said one official.

The board continues to be inclined against a decisive vote to fire Wolfowitz, which would be a wrenching event for the traditionally consensus-governed institution. Rather, board members hold out hopes that the Bush administration will persuade Wolfowitz to resign, ending the leadership crisis that has gripped the bank for eight weeks. South African Finance Minister Trevor Manuel told Bloomberg News in Shanghai that “there should be a parting of the ways” following the investigation.

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Wolfowitz affair sparks rift in Bush team

By Edward Luce in Washington

Financial Times, May 16 2007

For the past few weeks the Bush administration has been bitterly divided over the best way to respond to growing calls for Paul Wolfowitz’s resignation as World Bank president, according to people who have attended the White House meetings.

On Tuesday, Tony Snow, the White House spokesman, signalled an apparent change in the White House’s previously firm backing for Mr Wolfowitz when he said “all options are on the table”. But according to the White House insiders, one of those options still included Mr Wolfowitz staying on. The Bush administration is divided into three camps, which have very rarely seen eye to eye.

The first, which has been led by Hank Paulson, the US Treasury secretary, and “two or three like-minded individuals” in the White House, has consistently argued that Mr Wolfowitz’s continued tenure at the bank would impose a mounting cost on American interests and on Washington’s ability to set the agenda at the World Bank. It might also endanger America’s continued right to nominate the head of the World Bank (Europe has an equivalent right for the International Monetary Fund), they argued.

The second, which has been led by Dick Cheney, the vice-president, and Karl Rove, who is Mr Bush’s senior strategist, say the president should remain loyal to Mr Wolfowitz in the teeth of what they see as a European campaign to take revenge for the World Bank president’s pivotal role in pushing for the 2003 invasion of Iraq. They have scant interest in the health of “multilateral institutions like the World Bank”, said the insider.

And the third camp, which includes a number of mid-level operatives in the White House who were described as “non-ideological conservatives”, as well as – at times – Josh Bolten, the White House chief of staff, believe the longer the crisis continues the more it damages the US president. They are now arguing for Mr Wolfowitz’s departure. Condoleezza Rice, the secretary of state, has recently added her voice to theirs.

“There has been a food fight in the White House over Wolfowitz during the last four weeks and nobody really prevailed,” said the insider. “Whenever we felt that we were beginning to convince the president that it was not in America’s interests to keep delaying the inevitable [departure of Mr Wolfowitz] then somebody like Karl [Rove] or the vice-president would intervene and it would be back to square one.”

Those pushing within the administration for an earlier resolution of the World Bank crisis say they have been hamstrung by the instinctive loyalty both Mr Bush and Mr Cheney feel towards Mr Wolfowitz. They say they argued that the longer the administration left Mr Wolfowitz in place, the less leverage the US would have with its increasingly frustrated European partners to ensure a smooth transition for whoever would replace him.

But Mr Wolfowitz was able to rally allies both within the administration and outside it to come to his aid. “Paul has repeatedly called upon his neocon friends in the administration, the media and the think-tanks to come to his support,” said another insider. “There has been complete internal dysfunction as a result.”

The situation has been complicated by the fact that few people within the Bush administration understand what the World Bank does, says another official. This has meant that the administration’s shifting calculations have been mostly guided by day-to-day political deliberations rather than by an assessment of what would be in the longer-term interest of the US.

“Not many people care about the multilateral institutions or have a view one way or another,” said an official. “At no point has the administration sat down and said: “What do we think about the World Bank? How does it conflate with American interests?”

Some in the first camp fear that the US has now left it too late to retain the degree of goodwill it would need to ensure that Mr Wolfowitz’s [American] successor could help frame a positive agenda. “The longer the White House has delayed the inevitable the weaker its hand has become,” said one. “From a strategic point of view we could not have played this any worse.”