The World Bank is not financially sound

USA Today (Society for the Advancement of Education), Sept, 1995 by Patricia Adams

The U.S. and other governments should bail out now because the EBRD represents a growing taxpayer liability. As they did for the savings and loan institutions, taxpayer guarantees for failing bank investments grow by the day. In a typical year, the IBRD saddles unwitting taxpayers with another $45,000,000,000 in contingent liabilities. Over the next decade, the IBRD and IDA together plan to lend an additional $200,000,000,000.

One country's withdrawal c ould start a stampede. Others might decide to bail out, too, since they otherwise would be forced to assume a greater share of the liability for the IBRD's ongoing operations and since, over time, they would be taking over the liabilities of departing members. For instance, if the U.S. withdrew its membenihip, American taxpayers would be responsible for the $30,000,000,000 in liabilities incurred before its withdrawal. As new loans replaced old ones and new bonds were issued to finance them, though, U.S. taxpayers would shed their bank liabilities and the remaining shareholders would assume them.

A U.S. withdrawal well might cause the remaining shareholders to demand a realistic asset valuation and write-downs to determine the value at which to redeem U.S. shares, instead of trying to maintain a financial fiction at their taxpayers, expense. Then, negotiations over how to dispose of the World Bank, its assets, and its liabilities would become productive.

Ms. Adams, execub,ve director of Probe International, a Canadian environmental group, is author of Odious Debts: Loose Lending Corruption, and the Third World's Environmental Legacy. This article is based on a Cato Institute Policy analysis