Fraud advocates win at World Bank

NY Times:

Six months after taking over as president of the World Bank, Robert B. Zoellick faced new turmoil on Wednesday over a campaign against corruption in bank lending, with the resignation of the chief of the bank’s antifraud unit.

Bank officials said that despite Mr. Zoellick’s efforts to heal the wounds left from the stormy tenure of his predecessor, Paul D. Wolfowitz, the resignation of Suzanne Rich Folsom, Mr. Wolfowitz’s top deputy in his anticorruption campaign, was stirring new bitterness. They said that several of Ms. Folsom’s aides were also resigning.

Mr. Wolfowitz, who had made the battle against corruption a priority, was ousted as bank president last year after the disclosure that he had arranged a pay increase and promotion for his companion, a bank employee, in 2005.

“There is just a lot of bad blood,” said a bank official, speaking on the condition of anonymity to discuss internal matters. He added that many in the bank remained “allergic” to efforts to prosecute cases of fraud. Another official said that ties between Ms. Folsom and the bank had been on a “downward spiral” in recent months.

Associates of Ms. Folsom said she had decided to leave her job because she had accomplished the goal of making the battle against corruption a major priority, but realized that opposition to her work by others had made it difficult for her to go on.

News of her departure stirred mixed reactions within the bank, where many welcomed her decision, saying she had been selective in her prosecutions or overly aggressive, while others said she had done much to combat complacency.

Relations between Mr. Zoellick and Ms. Folsom, which began as positive, were described by many inside the bank as increasingly frayed in recent weeks, especially after editorials in The Wall Street Journal cited internal investigations and suggested that Ms. Folsom was being undercut and driven out.

A spokesman for Mr. Zoellick, Marwan Muasher, a senior vice president for external affairs, said that Ms. Folsom had not been pushed out and that Mr. Zoellick had been entirely supportive.

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The report on India was released Friday, and it found extensive corruption in several Indian lending programs. The report was filled with pictures of shoddy construction work at hospitals, clinics and other facilities that had been certified as adequate. It also included pledges by India to work with the bank on improving its procedures, but some officials in the bank said these were similar to ones made and not kept in the past.

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Corruption is widely described as a problem in the bank’s $30 billion annual lending programs for poor countries, but the extent is in dispute. Last September, an outside panel led by Paul A. Volcker, the former Federal Reserve chairman, found weak management, distrust and internal resistance to combating fraud at the bank.

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Apparently the liberals in the bank disliked the fight against corruption. The world Bank has outlived its usefulness when the forces of corruption triumph over those fighting it. Shut it down. Shut down the bank and quit making loans that are a vehicle for theft and corruption. Subprime borrowers are a bad bet whether they are buying a house or are a country mismanaged by corrupt officials.