The Business of Poverty: Obscene Salaries Dominate at Int'l Development Banks

Congress has been passive. Although the U.S. executive directors to the Bank and the IMF are nominated by the president and confirmed by the Senate, the Senate has not insisted on bringing salaries in line with U.S. norms.

U.S. Senator Mike Johanns (R-NB), the ranking Republican member on a Senate subcommittee overseeing international finance, said U.S. policymakers should at the very least review U.S. contributions to the IMF in light of the allegations surrounding Dominque Strauss-Kahn.

A 1977 U.S. law does mandate that the president "take all appropriate actions to keep the compensation for IMF employees at a level comparable to the compensation of both private business and the U.S. government in comparable positions." The law has never been enforced.

Complaints about lavish payrolls have been present for a long time. In 1990 when Martin Irwin resigned as a vice president from the World Bank, he wrote a scathing paper titled "Banking on Poverty." Prominent among the deficiencies he identified was that Bank employees were fixated on personal salaries, perks, and benefits, and little on the fate of the poverty-stricken:

The institution is plagued by massive overstaffing, bureaucratic gridlock, and staff preoccupation with further salary and benefit hikes. Public proclamations to the contrary, poverty reduction is the last thing on most World Bank bureaucrats' minds.

1995 was the last year the GAO examined the IMF compensation structure. They concluded:

They exceed the pay rates in the public sector in all surveyed markets, as well as in the United Nations.

Last year, the U.S. Senate Foreign Relations Committee slammed all of the development banks, describing them as “international bureaucracies answerable to no one government or constituency.”

In 2007, blogger Sameer Dossani reminisced about growing up in a World Bank household -- both parents worked for the World Bank:

As a child I heard snippets of conversation about West African travels and poverty around the world. I also picked up talk of “golden handshakes” and benefits such as my own private school education being subsidized by the Bank.

Noted Sen. Johanns:

All of this controversy, it makes you wonder if they are minding the store over there.

Update: Congress may probe DSK's $250k golden parachute.