Dominique Strauss-Kahn, International Monetary Fund Chief, No One Is Indispensable

The arrest of Dominique Strauss-Kahn, head of the IMF, on sexual assault and other serious crimes, immediately raised the question of how the organization would carry on. His able deputy, John Lipsky, will take over but he plans to leave in the late summer.  Lipsky may stay on, perhaps until the results of the scandal have settled down. Strauss-Kahn was on his way to see German Chancellor Angela Merkel when he was detained. His goal was to pressure her to support a larger bailout of Greece. Lipsky could certainly manage that summit with the same skills as his about-to-be former boss.

The US President is not indispensable, which has been proved many times in the past. The same holds true for the head of the Federal Reserve and all the global international banks. The media and some European financial politicians worry that the renegotiations of aid to Greece and Ireland and negotiations for aid to Portugal may be thrown off track without Strauss-Kahn.

The reality of the sovereign problem in Europe is plain and the potential dangers are clear.  So much so that the head of the IMF is not the major figure in the finalization of new debt programs. The IMF can be a broker and can contribute funds, but the matter depends largely on the decision of the German government to participate and for the three troubled nations to accept new restrictions which come with larger loans. Lipsky, who has been with the IMF off and on for twenty years, is more than a capable replacement under these circumstance.

What if Lipsky leaves? The concern is that a new chief will take a different approach to the IMF’s role in global finance. That may be so, but it is also true that the situation in Europe is so serious that no one at the helm of the agency can help but be drawn deeply into it. There is no more immediate or critical issue for the fund.

The IMF is not at a loss for candidates.  Strauss-Kahn was close to leaving anyway, probably to run to be president of France. Several people have been vying for the chance to take the position.

If there is no obvious choice, there are the many heads of Goldman Sachs (NYSE: GS) both past and present. Most have either been Treasury Secretary or have been considered for the job, which means that they have the background to run an organization like the IMF. Henry Paulson, who was critical to the resolution of the credit crisis in the US, may be available. Jon Corzine is currently CEO of MF Global.  He may miss public service after losing the governorship of New Jersey to Chris Christie.  Current Goldman CEO Lloyd Blankfein is under pressure to quit. He will need new work which is commensurate with his skills. The President is unlikely to pick such a controversial figure to replace Tim Geithner. The IMF, however, seems to be drawn to leaders with unsavory habits.

So based on the qualifications for the position, there are many people who can take Strauss-Kahn’s job and hardly miss a beat.

Douglas A. McIntyre