IMF critic gets chance to take on global body

For nearly 20 years, Adam Lerrick, a conservative economist, has been a vocal scold of global organizations like the International Monetary Fund, arguing that such institutions burn through taxpayer money and foster an insular culture of elitism, bailouts and scant accountability.

Now, Lerrick, a former investment banker and a visiting scholar at the right-leaning American Enterprise Institute, is set to get a chance to turn philosophy into policy, after the announcement last week that President Donald Trump intended to nominate him as deputy undersecretary of the Treasury for international finance.

The selection of Lerrick, who is well known in global financial circles for his evangelical opposition to bailouts for banks, countries and investors, underscores how Trump’s economic team is turning to critics of global economic policy as it seeks to reverse decades of Washington consensus.

Notably, Peter Navarro, an academic and author known for his highly critical views on China’s economic policies, was named a senior trade adviser to the president, with a brief to examine relations between the United States and countries like China and Germany.

Lerrick’s new job has not yet been formally announced, and he must be confirmed by the Senate before he can get to work.

But his pending appointment signals that another major cornerstone of conventional thinking under Democratic and Republican administrations — broad support for the IMF, the World Bank and other international financial institutions — will be scrutinized at the highest levels of the new administration.

Trump’s first volley on this front came last week in his proposed spending plan, which calls

The selection of Lerrick underscores how Trump’s economic team is turning to critics of global economic policy as it seeks to reverse decades of Washington consensus.

for slashing $650 million in financing to the World Bank over three years. And Congress, never a fan of taxpayer support for the IMF, continues to have its doubts.

Also last week, Rep. Bill Huizenga, R-Mich., introduced a bill that calls for the United States to oppose the fund’s “cofinancing of a third Greek bailout.”

Lerrick, if he is confirmed t, will report to David Malpass, the top Treasury official overseeing matters of international finance, who himself has a long record of criticizing the IMF.

Lerrick’s official remit includes advancing the Treasury’s policy agenda with America’s top economic allies, but it is expected that a major part of his job — his first in government — will be to push for major changes in how the World Bank and the IMF are run.

His skepticism of the fund’s role as presiding firefighter of the global financial system dates to the late 1990s, when he became disenchanted with the IMF’s response to countries in Southeast Asia experiencing runs on their currencies.

In 1999, having already quit his career as a senior investment banker at Salomon Brothers and Credit Suisse First Boston, Lerrick wrote a paper in which he argued that U.S. taxpayers could save a bundle if the IMF were allowed to tap global bond market funds rather than relying solely on quota-based disbursements from the United States and other large nations.

In essence, Lerrick’s complaint was that the fund had strayed too far from its original mandate: to provide short-term loans to developed economies running short on cash. Instead, he said, it had become a lender of first resort to developing economies in various states of financial distress.

This notion of the IMF as an overstaffed body of meddling economists too eager to bail out the next spendthrift government to come knocking on its door — be it South Korea, Brazil, Argentina or, ultimately, Greece — became a recurring theme for Lerrick in his critiques over the years.

Called before the Senate in 2000 to testify about the IMF’s future and the extent to which the U.S. government should continue backing the institution, Lerrick was asked point-blank by a senator: Do you think we need an IMF?

Yes, he replied, there was a big role for the IMF to play as a lender of last resort to emerging markets. The problem, he said, is that when the fund does all these other things, its utility is diminished.