Dominique Strauss-Kahn's forced resignation from the International Monetary Fund – and the search for an IMF successor – is a blessing in disguise. Strauss-Kahn's term in office saw a vast expansion of the IMF's activities, a fact often used to praise his tenure.
But a close examination yields a very different picture. Under Strauss-Kahn, who took over as the IMF managing director in September 2007, nearly every intervention has resulted in failure: The IMF allocated capital to places it shouldn't have allocated capital to, and propped up governments that shouldn't have been propped up.
The ideal IMF successor to Strauss-Kahn would be Ebenezer Scrooge – as a prelude to closing the institution down altogether.
That's because the IMF is a waste of money … your money.
To understand why, let's take a look at what the IMF is, and see how it works.
The IMF is an international financial institution that's based in the U.S. capital. It operates a bit like a credit union, but on a global scale. Like a credit union, the IMF's member countries – all 187 of them – provide the funding. And the IMF board then lends that money out.
Each member country has a financial stake in the IMF – a funding "quota" that's expressed as a percentage – and contributes accordingly. Because the United States is the single-biggest stakeholder in the IMF, it also has the single biggest quota (17.75%).
The United States is followed by Japan (6.58%), Germany (6.14%), and then France and the United Kingdom (at 4.52% each).
But that doesn't necessarily mean that this country (meaning U.S. taxpayers) is responsible for 17.75% of the money the IMF doles out as its share of the global bailout packages that have been issued during the past few years.
Indeed, the U.S. stake is actually higher. That's because some IMF-member countries have currencies that potential borrowers just cannot use. The IMF refers to this as "non-usable resources." As of January 2010, about 21% of the IMF quota contributions fell into this category.
Because the United States, Japan and their European counterparts have "usable" currencies, the IMF relies on them for funding contributions that are actually greater than their official quota.
And that means the burden on U.S. taxpayers is higher than most realize.