Brazil slams IMF handling of US credit crisis
Monday, 22 October 2007
WASHINGTON, Oct 21 (AFP): Brazilian Finance Minister Guido Mantega slammed the International Monetary Fund yesterday for having been lax in its handling of a US housing-related credit crisis that roiled global markets.
"Allow me to point out the irony of this situation," Mantega told IMF policymakers at the opening of annual meetings here of the IMF and the World Bank.
"Countries that were references of good governance, of standards and codes for the financial systems, these are the very countries that are facing serious problems of financial fragility putting at risk the prosperity of the world economy," he told the 24-member IMF steering committee, referring to major industrialised nations.
The finance minister of the emerging Latin American powerhouse bluntly reproached the IMF for its stance during financial turmoil that "has its epicenter in the United States," by far the largest shareholder in the 185-nation IMF.
"The Fund had little to say that was practical about this crisis," he said. "It has been excessively cautious in its recommendations. It justifies this caution by pointing to the unprecedented nature of the problems."
Mantega said the IMF "appears to be inadequately equipped to face such a situation."
The IMF managing director, Rodrigo Rato, rejected the accusation.
The Fund last April was "already very clearly stating our worries about the subprime segment in the United States," Rato said.
And at the Group of Eight summit in Germany in June, he said, he spoke in the name of the Fund and had made it clear the IMF was "worried about the complacency and the quality of some of the deals that were being done at the time in the markets."
The Group of 24 (G24) developing countries, which includes the rapidly expanding economies of Brazil, India and Nigeria, criticised the IMF Friday for failing to prevent the crisis in the US subprime sector, where loans were given homebuyers with poor credit histories.
Amid the collapse last year of a years-long housing boom in the United States and rising interest rates, high-risk borrowers defaulted on their mortgages and thereby threatened billions of dollars' worth of mortgage-backed securities.
"Allow me to point out the irony of this situation," Mantega told IMF policymakers at the opening of annual meetings here of the IMF and the World Bank.
"Countries that were references of good governance, of standards and codes for the financial systems, these are the very countries that are facing serious problems of financial fragility putting at risk the prosperity of the world economy," he told the 24-member IMF steering committee, referring to major industrialised nations.
The finance minister of the emerging Latin American powerhouse bluntly reproached the IMF for its stance during financial turmoil that "has its epicenter in the United States," by far the largest shareholder in the 185-nation IMF.
"The Fund had little to say that was practical about this crisis," he said. "It has been excessively cautious in its recommendations. It justifies this caution by pointing to the unprecedented nature of the problems."
Mantega said the IMF "appears to be inadequately equipped to face such a situation."
The IMF managing director, Rodrigo Rato, rejected the accusation.
The Fund last April was "already very clearly stating our worries about the subprime segment in the United States," Rato said.
And at the Group of Eight summit in Germany in June, he said, he spoke in the name of the Fund and had made it clear the IMF was "worried about the complacency and the quality of some of the deals that were being done at the time in the markets."
The Group of 24 (G24) developing countries, which includes the rapidly expanding economies of Brazil, India and Nigeria, criticised the IMF Friday for failing to prevent the crisis in the US subprime sector, where loans were given homebuyers with poor credit histories.
Amid the collapse last year of a years-long housing boom in the United States and rising interest rates, high-risk borrowers defaulted on their mortgages and thereby threatened billions of dollars' worth of mortgage-backed securities.