It now seems almost certain that Paul Wolfowitz will leave the presidency of the World Bank. It’s only a matter of negotiating the terms of his resignation.

For those who have not been following this issue, Wolfowitz got into trouble because his girlfriend worked at the Bank when he was chosen by George W. Bush to be its president. In order to avoid a potential conflict of interest, he arranged to have her detailed to the State Department. Because this was essentially an involuntary move on her part, she was given a large pay raise as compensation.

This pay raise to Wolfowitz’s girlfriend became a source of contention between him and his critics on the Bank staff, who have been unhappy with some of his policies. Further details are unimportant. All that matters is that the whole issue has become a major embarrassment for the Bank.

I don’t know whether Wolfowitz did the right thing or the wrong thing in the way he handled the problem of becoming the boss of an organization employing his girlfriend. It’s quite possible that the whole affair was blown out of proportion by people who were simply opposed to his policies and seized upon it to discredit them. All I know is that the game is over and it’s time to move on.

In my opinion, a key source of the Wolfowitz problem is the means by which the World Bank president is chosen in the first place. Because of an informal understanding made just after World War II, the position has always been filled by an American. As part of the same understanding, the head of the International Monetary Fund has always been a European.

Consequently, the president of the United States can pretty much pick anyone he feels like to run the World Bank. The job doesn’t require Senate confirmation or even a background check. The U.S. Executive Director at the Bank simply puts forward the name of whoever has been designated and it is rubber stamped by the board of the World Bank.

Therefore, there is really no opportunity for anyone other than the American president to review the qualifications or appropriateness of his choice. Once the decision is made, it is a fait accompli.

In practice, previous White Houses have always deferred to the Treasury Department regarding the World Bank, because it monitors U.S. involvement with that institution on a day-to-day basis. However, that seems not to have been the case with Wolfowitz. According to Britain’s Financial Times newspaper, the Treasury was basically cut out of the loop on Wolfowitz and only learned of his appointment when informed by the British Treasury. Apparently, Bush told British Prime Minister Tony Blair of his decision before notifying his own Treasury secretary. Continued...