IMF ‘In Awe’ of Rich Nations Missed Coming Crisis

By Sandrine Rastello – A report gauging the IMF’s performance from 2004 through 2007 said its economists were sometimes “in awe of” the authorities’ reputation and expertise in larger nations.

“IMF staff felt uncomfortable challenging the views of authorities in advanced economies on monetary and regulatory issues, given the authorities’ greater access to banking data and knowledge of their financial markets, and the large numbers of highly qualified economists working in their central banks,” according to the IMF audit released today (2/9/11). more>

“The IMF’s ability to detect important vulnerabilities and risks and alert the membership was undermined by a complex interaction of factors, many of which had been flagged before but had not been fully addressed. The IMF’s ability to correctly identify the mounting risks was hindered by a high degree of groupthink, intellectual capture, a general mindset that a major financial crisis in large advanced economies was unlikely, and inadequate analytical approaches. Weak internal governance, lack of incentives to work across units and raise contrarian views, and a review process that did not “connect the dots” or ensure follow-up also played an important role, while political constraints may have also had some impact.”


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