Interestingly enough, as the IMF enjoys the power of handing out $100bn, it is quietly doubting its own financial acumen. The Financial Times reported a couple of weeks ago that an "acrimonious internal review" was leaked to the paper by IMF bureaucrats. The details of the review, or even why it was acrimonious, were not revealed. Most noticeably, the paper failed to mention who at the IMF was being treated with acrimony. We are left to guess.
Who is Hubert Neiss? Type those two words into a database, and you will find that Hubert Neiss is the director of the IMF's Asia and Pacific division. Hubert Neiss must have had some share in the IMF's acrimonious internal review. If any human being who works for the IMF can be fairly charged with having something to do with the Asian and Pacific debacle, you would think that person would be the Asian and Pacific director. After all, the one thing that all the fallen markets have in common is that they are both Asian and Pacific.
Of course, in a bureaucracy it's impossible to know who did what; that's the whole point of a bureaucracy. Hubert Neiss may be an innocent man. But if you read between the lines of the news accounts, you discover the following facts about Hubert Neiss.
He was privy to the secrets of the Thai government while it surreptitiously and idiotically borrowed money it could never repay. The Central Bank of Thailand ran through $60bn, $23bn of it borrowed, defending the baht. That, you might think, is the sort of thing Hubert Neiss might notice, and put a stop to. But the $60bn got spent without so much as a peep from Hubert, or the IMF.
This was a very big mistake. By their silence, the IMF bureaucrats signalled to the financial markets that all was more or less fine in Thailand. When the markets finally got wind of what Thai officials had done, they not merely reacted but overreacted.
Immediately after the crash, Thailand's financial leaders engaged in public self-flagellation. ("I know Amnuay feels pain, as I do," former Thai central banker Rerngchai Marakanond said of Amnuay Viravan, the former Thai finance minister.) But within the IMF, no one similarly stood up to eat crow, or even to explain what he was doing. Nothing whatsoever changed inside the IMF: Hubert remained at the helm of the Asia and Pacific division. No one dared suggest that the only reason the Thai government was able to borrow $23bn in the first place was that the banks who lent the money were reassured by Hubert's presence.
The reason no one dared suggest this is that, now that there was a fully fledged crisis in Asia, Hubert was perfectly indispensable. And so...
Hubert returns to Thailand to hand over $17bn to shore up the economy. Having watched quietly while Thai dummies guided their economies into bankruptcy, he now hurls billions at their replacements. The IMF's explanation for Hubert's endurance: the Thai collapse isn't Hubert's fault. Hubert knew that Thailand was headed for a crisis, but he was powerless to do anything about it. If Hubert had let on to the global investing public that the Thais were running through money as fast as Donald Trump after a divorce, the Thais would no longer let Hubert sit in on the secret meetings in which he learned whatever he knew about the Thai economy. Or, for that matter, all those other economies that are now following Thailand's sorry lead.
Fearing that the crisis will spread, Hubert flies to Indonesia to tell the government that it must shut down 16 weak banks. The stated purpose of this advice is to restore confidence in the economy and the rupiah. The effect is to trigger a run on the currency.
And Hubert? It's impossible to say how he feels about his role in Asia. Certainly you don't see him talking about his pain. You see him flying business class.
With the whole region in flames, Hubert becomes the man to see. Instead of retiring to a desk in Washington, he meets with Suharto to establish the terms of the IMF's $40bn loan to shore up the rupiah. And that is where Hubert is last spotted: using his knowledge of the financial markets to shepherd the Indonesians through their crisis.
It is time to acknowledge the internal contradictions of Hubert Neiss. The IMF was conceived at a time when the free market was held in low esteem and government was held in high esteem. The shoe is now on the other foot, and to survive, the IMF has had to become the high church of free markets. But the individuals who work for the IMF, and who peddle its free market religion, have very little experience of free markets themselves. They are government bureaucrats. Their life experience has left them with little feel for the way markets will respond to their behaviour. And so, in a way, the IMF is right not to single out Hubert Neiss for blame. Hubert may look like a cause. But he is merely a symptom.
q Michael Lewis is the author of 'Liar's Poker', the best-selling account of Wall Street in the 1980s.
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