[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                   THE WORLD BANK'S DISCLOSURE POLICY

                   REVIEW AND THE ROLE OF DEMOCRATIC

                  PARTICIPATORY PROCESSES IN ACHIEVING

                    SUCCESSFUL DEVELOPMENT OUTCOMES

=======================================================================



                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 10, 2009

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-73



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             KENNY MARCHANT, Texas
RON KLEIN, Florida                   THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio              KEVIN McCARTHY, California
ED PERLMUTTER, Colorado              BILL POSEY, Florida
JOE DONNELLY, Indiana                LYNN JENKINS, Kansas
BILL FOSTER, Illinois                CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana                ERIK PAULSEN, Minnesota
JACKIE SPEIER, California            LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 10, 2009...........................................     1
Appendix:
    September 10, 2009...........................................    29

                               WITNESSES
                      Thursday, September 10, 2009

Bissell, Richard E., Executive Director, Policy and Global 
  Affairs, National Research Council.............................     7
Blanton, Thomas S., Director, National Security Archive, George 
  Washington University..........................................    12
Ebrahim, Alnoor, Associate Professor, Harvard Business School....     9
Ramachandran, Vijaya, Senior Fellow, Center for Global 
  Development....................................................    10
Stiglitz, Joseph E., University Professor, Columbia University...     4

                                APPENDIX

Prepared statements:
    Waters, Hon. Maxine..........................................    30
    Bissell, Richard E...........................................    32
    Blanton, Thomas S............................................    40
    Ebrahim, Alnoor..............................................    78
    Ramachandran, Vijaya.........................................   106
    Stiglitz, Joseph E...........................................   111


                   THE WORLD BANK'S DISCLOSURE POLICY


                   REVIEW AND THE ROLE OF DEMOCRATIC


                  PARTICIPATORY PROCESSES IN ACHIEVING


                    SUCCESSFUL DEVELOPMENT OUTCOMES

                              ----------                              


                      Thursday, September 10, 2009

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:04 a.m., in 
room 2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Members present: Representatives Frank, Waters, Maloney, 
Watt, Meeks, Moore of Kansas, Hinojosa, Baca, Scott, Green, 
Moore of Wisconsin, Ellison, Klein, Perlmutter, Carson, Himes, 
Peters; Royce, Miller of California, Neugebauer, Posey, 
Jenkins, Paulsen, and Lance.
    The Chairman. The hearing will come to order. This is a 
hearing on the World Bank's disclosure policy review and the 
role of democratic participatory processes in achieving 
successful development outcomes. This is a matter in which this 
committee has a certain proprietary interest because in the 
early 1990's, this committee and the Subcommittee on 
International Monetary Policy in particular worked hard to urge 
the World Bank to create an inspection panel and to improve the 
openness. And we did it for a number of reasons. One of them is 
that these are decisions that are better made if there is 
participation. This is not simple arithmetic. These are not 
purely technical decisions. Lacking the information that you 
get from those most directly affected, you make bad decisions, 
first of all, because they will not take into account 
legitimate concerns of those directly affected, but secondly, 
because they have information that will benefit the process.
    So we were pleased that these panels were adopted. We have 
been urging the other IFIs to do that with some success. But we 
do also want to make sure this is done in the appropriate way. 
And I will have to say that when we did this, it was without 
partisan division. There are some issues that get more 
ideological when we get into some of the economic development 
issues. But on this question of openness and transparency, it 
is clearly in everybody's interest. And in particular, I 
believe that we have not as a society globally provided the 
resources we need to alleviate poverty. Given the wealth that 
we have succeeded in creating through our private sector in 
much of the world, allowing children to go hungry, allowing 
basic human needs to remain unmet for some people is, in my 
judgment, morally unacceptable. We need to increase those 
resources.
    One threat to our ability to do that is both the fact and 
the perception of corruption. Corruption is a terrible attack 
on the lowest-income people both in diverting resources from 
them and in eroding the kind of consensus you need to provide 
support. That is one of the major arguments in favor of the 
kind of issues we are talking about today because there are 
ways to uncover corruption. In the absence of this sort of 
openness, corruption flourishes. And so there are all manner of 
reasons why this is a good thing.
    I do want to add one other point not directly relevant to 
this hearing. We may touch on it. We have the very 
distinguished former chief economist of the World Bank. And I 
have 2 regrets: one, that he is not still the chief economist; 
and two, they did not pay more attention to him when he was, 
because I think the policies that were there were felt. We have 
made improvements. I think we have made significant 
improvements from the 1990's when, for instance, the 
international financial institutions responded wholly 
inappropriately to the age of financial crisis in ways that, in 
fact, exacerbated it by misdiagnosing it and having 
misdiagnosed it and misprescribing. But we have continued to 
push. The World Bank has a Doing Business report, which I 
believe is a profoundly reactionary and misguided document. It 
is wrong not only ideologically but economically. With the 
great work of the staff of this committee and Mr. McGlinchey 
and others, we have pushed for changes. And we think things are 
getting better, but we recently saw the ranking of countries 
where it is best to do business. And it turns out that not 
being very fair to the workers still counts for more in the 
World Bank's rankings of countries than before.
    Mr. Stiglitz pointed out that not simply is there a problem 
with a bias against treating workers fairly, but the public 
financing policies that it proposes are counter to what many of 
us think is appropriate. Certainly, we had the paradox, I 
think, during the Clinton Administration, of practicing one set 
of economic policies domestically but exporting the opposite 
set internationally. What is good for us here ought to be good 
for us to be exporting. So I will announce today that we will 
be having a hearing at some point and we have a priority on 
getting the financial regulation through. That will continue to 
be the priority. But sometime before the end of this year, we 
will have a hearing on this World Bank Doing Business report 
because I am determined to keep it up. And the World Bank 
should understand there will be, I believe, no further vote by 
this Congress to make funding available to the Bank until we 
get more progress in this regard. Now, I say that with some 
confidence because as chairman I cannot make things happen; but 
when a lot of people don't want to do them in the first place, 
it isn't hard to stop them from happening. A great demand from 
Members that we give more and more to the World Bank is 
containable, particularly in my role as chairman.
    Hopefully, they will better understand that we are more 
serious about the revisions to this Doing Business report and 
its consequences than they appear to realize. I now recognize 
the ranking member of the subcommittee, the gentleman from 
California.
    Mr. Miller of California. Thank you, Chairman Frank. Your 
staff thinks you walk on water, so I don't know why you don't 
think you can accomplish more than you say you can.
    The Chairman. If the gentleman would yield. Think for a 
minute about the composition of this committee and please don't 
suggest that I would walk on water.
    Mr. Miller of California. I was waiting to see, it is all I 
am saying. I don't think many of us really understood or 
expected the financial crisis that we have gone through in this 
country. But the global financial crisis has touched all 
nations and for some changed the economic development reality 
completely. And I think you have all witnessed that personally 
in trying to deal with that. Nations that worked hard to make 
strides developing their economies have been set back in those 
efforts, some a little and some, sadly, a lot. The World Bank 
has the difficult mission of assisting these countries as they 
struggle with challenges of poverty, disease, and as Chairman 
Frank said, corruption. With these changed global economic 
circumstances comes a need for change in the Bank itself and 
change, as we all know, is very difficult. I think that all of 
us were glad to see that the Bank is willing to break with past 
practices and making the difficult job of adopting a more 
effective information disclosure policy. I am pleased to learn 
of the Bank's plan to adopt a mechanism for declassification, 
establish greater openness of the board's deliberations, and 
ensure that the greater transparency results in greater 
partnership among interested parties. For these efforts, the 
Bank deserves our praise.
    But I would like to stress the importance that these 
reforms not merely exist in a document, but become embodied and 
embedded in the culture of important institutions. The desire 
to be more upon, to share information, to see others as 
partners and not adversaries is a powerful tool and of the 
utmost importance. Formulating the policy is just the first 
step. The hard work will be implementing this approach among 
staff and the board member nations. I am sorry and I worry that 
the Bank officials in some instances may resist the compliance 
if they believe that disclosure of information will reflect 
poorly on themselves and thus affect their careers. Many people 
are dealing with careers and worried about the future in their 
careers. And we have seen some circumstances in government 
where that has come back to haunt individuals. Therefore, I 
would really urge the Bank to develop a separate policy to deal 
with the staff or leadership's timely disclosure. By enforcing 
disclosure, we will be able to prevent fraudulent and abusive 
bank practices in the financial--and the choices in the future. 
I look forward to your testimony and I yield back the balance 
of my time.
    The Chairman. I thank the gentleman and I now recognize the 
gentleman from North Carolina for a few minutes.
    Mr. Watt. Thank you, Mr. Chairman. Thank you for calling 
the hearing. I just wanted to make three quick points. I think 
this crisis in which we have found ourselves domestically and 
worldwide, the economic crisis has increased the pressure to 
find a more appropriate balance between privacy and 
nondisclosure and the public's right to know. And this is not 
unique to the World Bank. We are facing that same dilemma 
domestically with increasing demands for more transparency from 
the Fed.
    Greg Meeks--who chairs the International Monetary Policy 
Subcommittee--and I just got back from Africa, increasing our 
demands on the African development banks for greater 
transparency and disclosure and more immediate information up 
on their Web sites about what they are doing. And this seems to 
be a mantra and a mandatory undertaking from all of the 
financial institutions in which we are involved domestically 
and internationally.
    So I think this is an appropriate undertaking. I probably 
couldn't say it better than the briefing material that we got 
in preparation for this hearing. Three sentences kind of 
summarize it succinctly:
    ``Without timely access to information, individuals are 
unable to participate in decisions that may affect their lives 
and livelihoods.
    ``Without public access, communities are unable to hold 
decision makers accountable.
    The right to access information is a fundamental 
prerequisite to meaningful participation and Democratic 
accountability.''
    I think that applies to our domestic institutions, the Fed 
and the call for more transparency there. And we have to carry 
that mantra internationally if we are going to carry it in our 
domestic sphere. So I support this greater call for 
transparency and I think this is an important hearing. Mr. 
Chairman, I yield back the balance of my time.
    The Chairman. We will now begin the testimony. And we will 
begin with Joseph Stiglitz. Professor Stiglitz was chairman of 
the council for economic advisors under President Clinton and 
he was chief economist of the World Bank from 1997 to 2000 and 
won the Nobel prize in economics--not in any particular order 
of importance. Professor Stiglitz.

STATEMENT OF JOSEPH E. STIGLITZ, UNIVERSITY PROFESSOR, COLUMBIA 
                           UNIVERSITY

    Mr. Stiglitz. Thank you very much. First, let me thank you 
for this opportunity to discuss reforms in the governance, 
transparency, and accountability of the World Bank. What I have 
heard from all three of you so far is really music to my ears. 
These are things that I have been talking about for a long 
time. I have been pushing for this within the World Bank. On 
one occasion, I pushed so hard on this issue of openness and 
transparency that somebody aksed if the speech was my 
resignation letter, because they thought I was really pushing 
the envelope too hard. But I do think this is absolutely 
fundamental for Democratic processes.
    While I will focus on the World Bank, I should add that 
most of what I have to say is equally relevant to other 
international financial institutions. I will begin by 
reiterating what I said in my testimony before this committee 
on May 22, 2007. First, America and the world has a strong 
interest in contributing to reducing poverty and promoting 
growth in the developing world. Aid can be an effective 
instrument in achieving these objectives. Second, the 
multilateral institutions of which the World Bank is a premier 
institution play an important role in this global effort. For a 
variety of reasons, assistance administered through the World 
Bank and other multilateral institutions can be very effective 
in achieving our objectives and can be an important complement 
to bilateral aid. Third, it is therefore in our interest that 
the World Bank remain strong, credible, and effective. The Bank 
has rightly emphasized good governance and corruption. But the 
Bank can only be effective if it is seen as having good 
governance itself.
    This morning I want to elaborate on a few issues related to 
governance and transparency. The importance of this issue of 
transparency was brought home to me during my visit in the last 
couple of days to Iceland. The country has had a bank collapse 
of unprecedented magnitude. It followed the deregulation and 
liberalization policies that had become fashionable in the past 
quarter century, policies which by the way were often advocated 
and pushed by the international financial institutions. As in 
the United States, inadequate regulation in Iceland has imposed 
a huge cost on society, a cost that will be borne for years, 
perhaps even decades to come. The IMF has helped support 
Iceland with their program which was unusual, provided more 
fiscal space than it does in its typical programs, and even 
encouraged them to impose capital controls.
    But a very large number of individuals with whom I talked 
and interacted have little confidence in the transparency of 
the institution. They worry that there are secret, yet-to-be-
disclosed conditions. A widely shared sentiment is that, while 
the IMF approach may work in dealing with a less Democratic and 
less educated society, it is totally unsuitable for a vibrant, 
engaged, and educated citizenry such as that of Iceland.
    Whether the accusations and concerns have any validity is 
not the point I want to raise: it is that the legacy of the 
past haunts the present. This is why it is imperative that 
reforms be made quickly.
    Some reforms have already occurred. It may seem strange 
that it is considered a major victory in democratic governance 
in the 21st Century that the G-20 has agreed at last that the 
head of an international financial institution should be chosen 
on the basis of merit, but we should celebrate the victory and 
hope the decision gets implemented. Because these institutions 
have no system of direct democratic accountability, it is all 
the more important that there be confidence in their 
governance, that they be transparent, and that attention be 
given to a variety of other forms of accountability. The 
institutions have pushed a variety of policies whose benefits 
either for development or poverty alleviation are questionable. 
And as the chairman pointed out, they have often pushed 
policies that are inconsistent with those policies that we have 
here in the United States. They push policies of deregulation 
and capital market liberalization, which have played a large 
role in the crisis and help explain its rapid spread throughout 
the world. There may be a link between these failures in policy 
and the systems of governance. Had there been more transparency 
and better systems of accountability, perhaps the voices that 
were raised against these policies might have had more impact.
    While the reforms that have been agreed to among the G-20 
are steps in the right direction, it should be clear that the 
pace of reform is slow, and the reforms on the table are likely 
to have limited impact and are insufficient to address long-
standing criticisms. For instance, while giving emerging 
markets more voting rights is desirable, there is little reason 
to believe that it will result in fundamental changes to the 
behavior of the institutions. More fundamental reforms such as 
double majority voting should be considered. Other ways of 
increasing accountability of the international institutions 
need to be explored. While proposals to strengthen reporting to 
a more politically accountable body, such as a council of 
finance ministers, might seem to do this, such reforms may have 
the opposite effect. If finance ministers are insufficiently 
engaged, it would in effect give more autonomy to the 
bureaucracy. The World Bank poses a particular problem as it is 
not really a bank but a development institution. Meanwhile, 
finance ministries, such as the U.S. Treasury, are not 
development agencies, so there is a double problem. Not only 
are some of the policies that are pushed more reflective of the 
distinctive perspectives of the financial sector, but also 
there is really no depth of understanding what makes for 
successful development.
    Moreover, many critics of current governance are skeptical 
of the commitment of finance ministries to some of the major 
objectives of the Word Bank, including alleviating poverty and 
assisting developing countries in the provision of global 
public goods. Growth by itself need not lead to poverty 
alleviation. Growth pursued the wrong way, with policies for 
instance that increase in stability, can even increase poverty. 
Moreover, what is in the interest of some in the financial 
sector may run counter to stability, growth, and poverty 
reduction, especially in developing countries, as we have all 
learned in the recent crisis at a great expense. There is no 
simple way of addressing these concerns.
    I want to put forward four sets of governance reforms. One 
of the underlying problems when we talk about improved systems 
of governance accountability is accountability to whom. Systems 
of accountability do affect behavior. A thought experiment 
might help clarify what is at stake. If the World Bank had to 
report to a council of labor ministers, there might be more 
concern about ensuring that the World Bank is pushing for the 
acceptance of core labor standards, adequate levels of minimum 
wages, enforcement of workplace health and safety standards, 
and other forms of job protection. Some of the concerns that--
    The Chairman. Another 30 seconds, Mr. Stiglitz.
    Mr. Stiglitz. Okay. Some of the concerns that you raised 
would have been given more attention. In my written testimony, 
I talk about a number of governance reforms that I think would 
improve the system of accountability. I also talk about a 
number of reforms to increase transparency. Let me just 
highlight one of them, which is that just as we have been 
talking within the United States about making sure that the 
Federal Reserve respects the Freedom of Information Act, we 
should require the World Bank to adopt a standard that is at 
least as good as the Freedom of Information Act. The argument 
against this that has sometimes been put forward is that the 
bank has commercial secrets that should not be given away as 
though you are dealing with a public body.
    The Chairman. Thank you. We will get into this in the 
question period.
    Mr. Stiglitz. Okay. Fine.
    [The prepared statement of Professor Stiglitz can be found 
on page 111 of the appendix.]
    The Chairman. Next is Richard Bissell, who is the executive 
director of the Policy and Global Affairs of the National 
Research Council, and he was a member of the first World Bank 
Inspection Panel in 1994. And he was chair of it for his last 
year. Mr. Bissell.

STATEMENT OF RICHARD E. BISSELL, EXECUTIVE DIRECTOR, POLICY AND 
           GLOBAL AFFAIRS, NATIONAL RESEARCH COUNCIL

    Mr. Bissell. Thank you very much, Mr. Chairman. It is a 
real delight to be here today and talk about one of the most 
important subjects in the context of the World Bank and its 
long-term effectiveness. What I want to do in my time is take 
you inside the issue of how disclosure policy is set at the 
Bank, some of the directions we think it needs to go, and some 
of the barriers that may occur. I am speaking today in my 
capacity as a member of the board of directors of the Bank 
Information Center and I am also presenting this testimony on 
behalf of the Carter Center, the Center for International 
Environmental Law, Oxfam America, Revenue Watch Institute, 
Transparency International, and the World Wildlife Fund. As you 
said, I have served in prior capacities as a member of the 
Inspection Panel at the World Bank and also the Compliance 
Review Panel at the Asian Development Bank where I benefited 
enormously from your proactive support of these mechanisms and 
the kind of transparency which is essential for making them 
effective in the banks for accountability purposes.
    In the context of development, public access to timely, 
relevant information is critical for a number of reasons. 
First, it respects democratic rights and norms that call for 
access to information held by public bodies.
    Second, it strengthens development outcomes by enabling 
informed participation of local stakeholders and the 
incorporation of local knowledge. And finally, it improves 
accountability by enabling third party monitoring of 
development decisionmaking and programs. Any good policy for 
transparency should meet all three tests. As most of you know, 
the Bank currently operates under a disclosure policy adopted 
in the 2001-2002 timeframe. And the principle was conceded at 
that time, which was the last major rewrite of this policy, 
that timely dissemination of information to local groups 
affected by the projects and programs supported by the Bank is 
essential for the effective implementation and sustainability 
of projects. The issue since then has been how to implement 
that principle.
    There are a number of weaknesses with regard to the 2000 
policy that we have noted over the years. The first is there is 
no presumption of disclosure of information. Second, there are 
limits on access to draft or preapproval information. Third, 
there has been virtually no project implementation information 
available. Fourth, there is a very weak request system for 
information and no option for appeals that has any real 
significance. Fifth, there is no access to shareholder 
positions, that is, of the executive directors at the Bank. And 
last, there is a weak translation framework which is essential 
for allowing information to reach people who live in project 
areas.
    From my own point of view, the question of access to 
information has arisen in virtually every case that was 
reviewed by the Inspection Panel of the Bank. The fundamental 
role played by open information in every healthy society 
becomes clear when you look at the range of requests that came 
before the Inspection Panel.
    Earlier this year, the World Bank commenced a review of its 
policy on disclosure and information. They posted an approach 
paper that has a number of positive elements if it is adopted 
later this year. First, it has a true presumption of 
disclosure. Second, it has a functioning request and appeal 
system. Third, it allows for implementation information of 
certain kinds to be released. Fourth, it has a release of final 
draft information, that is, of drafts going to the board with 
regard to various strategies and programs. And fifth, there is 
some expanded access to board records.
    We applaud these ideas and these proposals for moving 
forward. But we still have some concerns with this new policy 
if it is adopted. First of all, there is very limited 
transparency of the board, and the decisions and the approaches 
taken within the board are essential for understanding the 
decision making in the Bank. Second, there is an issue with 
regard to the narrowness of the exceptions allowed under the 
policy. Third parties, particularly shareholders, contractors, 
and others, are granted significant discretion over the release 
of information of information they have provided to the Bank 
beyond the set of required disclosures. That is of concern.
    Third, we question the strenght of the appeals function. 
The appeals committee under the design will be essentially a 
bank management committee, not an independent appeals process. 
We suggest that there should be a second stage independent 
appeals function that would provide greater integrity to this 
request in the appeals system. Fourth, we think it is important 
to strengthen the role of translations. The Bank should ensure 
that all translated project materials, even those developed by 
the borrower, are readily available, including on the Bank's 
Web site. The access of people to the Web has significantly 
grown since 2002. And lastly, I would just emphasize that it is 
important that the Bank, when it is performing its information 
policies, see itself as setting the gold standard for all 
international financial institutions, many of which, in fact, 
are reconsidering their policies and watching what standard the 
Bank sets. At one time, the Bank's policies in this area were 
considered the gold standard for all MDBs. But the record is 
now quite inconsistent and in this key area of information 
disclosure, the Bank board and senior management have an 
opportunity to demonstrate the kind of leadership to which they 
should aspire. So we want to work with the Bank on its 
continuing journey to approve its transparency and 
accountability. We support some of the draft steps that have 
been proposed, but we will continue to press for further 
measures to build what is really a 21st Century approach to 
accountability in transparency in a global, public 
organization.
    [The prepared statement of Mr. Bissell can be found on page 
32 of the appendix.]
    The Chairman. Thank you.
    Next, we have Professor Alnoor Ebrahim from Harvard 
Business School.

   STATEMENT OF ALNOOR EBRAHIM, ASSOCIATE PROFESSOR, HARVARD 
                        BUSINESS SCHOOL

    Mr. Ebrahim. Chairman Frank, members of the committee, 
thank you for your invitation to testify before you. In 
addition to my position as a faculty member at Harvard Business 
School, I have worked as a consultant to the World Bank. I have 
also worked as a consultant to a number of international civil 
society organizations. My testimony is in my capacity as a 
scholar and it is based on research on reform and 
accountability undertaken at the Bank, particularly where civil 
society organizations played an important part. I want to begin 
by emphasizing one overarching point and that is the Bank is a 
public institution with the mission of fighting poverty. This 
may seem obvious to those of you in this room, but it is 
something that I believe is easy to lose sight of in debates, 
particularly about reform. It has real implications. First of 
all, it implies that any reform effort must be directed towards 
strengthening and enforcing this public purpose. The second 
implication is that it means that the Bank must be 
accountable--this is Professor Stiglitz' question of 
accountability to whom. It must be accountable to the people 
that it is supposed to serve, the poor and particularly those 
who are most affected by its activities.
    So the question then is, how can the Bank be accountable? 
And we know that essentially in global governance we have an 
absence of the kinds of accountability mechanisms we take for 
granted in democratic societies: elections; and checks and 
balances. So we must rely even more heavily on the practices 
that citizens expect of government agencies anywhere, 
transparency which I believe is just the beginning, reasonable 
opportunities for citizens to participate in decisions that 
affect their lives, good oversight, and responsive governance.
    From this, I believe there are two critical questions we 
can ask of the Bank at this point. First of all, how can the 
World Bank use participatory processes to achieve better 
development outcomes through its projects and policies? And 
second, what would governance that is responsive to the poor 
actually look like? On the first question about participation 
in policies and projects, we have seen numerous reforms over 
the years. The information disclosure policy that is currently 
under review and is the key subject of this hearing; ten 
safeguard policies on environmental assessment, involuntary 
resettlement, indigenous peoples and so on; to complaints 
mechanisms, the Inspection Panel, which Mr. Bissell chaired; 
and public consultations on several lending practices, such as 
on structural adjustment, on extractive industries, on large 
dams. A look at each of these suggests that there are two major 
challenges. If transparency is the first step, these two major 
challenges become the next step. First of all, the Bank needs 
enforceable standards on public participation. Public 
consultations typically occur only after a project has been 
formulated, and in the Bank's own words, ``in an arbitrary 
fashion with very short notice and/or very late in the 
process.'' They rarely occur at the most critical stages of the 
project cycle: early on, when key decisions are being made and 
later during monitoring and evaluation. This problem extends to 
how the Bank revises its own internal policies and lending 
practices. It holds public consultations that are well-
intentioned, but are generally ad hoc. It reinvents the review 
process each time, and is rarely clear about what it aims to 
achieve. In essence, it needs two standards of public 
participation: one for projects; and one for how it reviews its 
own internal policies. That latter is not so different from 
what the U.S. Administrative Procedures Act from 1946 does for 
us.
    The second related challenge is that in order for a policy 
of public participation to have teeth, it must be tied to the 
performance reviews of staff. And I believe this is the kind of 
point that Mr. Miller was getting at. The Bank is filled with 
dedicated professionals, but few have the incentives to 
actually engage project-affected communities because they are 
under immense pressures to get bigger loans out the door. Staff 
performance appraisals that reward public participation can 
make the Bank more effective at fighting poverty. Let me return 
now for a moment to the second broad question which was, what 
would governance that is responsive to the poor actually look 
like? We know that the Bank's structure is based on a corporate 
shareholder model that gives the greatest voice to the 
wealthiest donors. It is also very well documented that this 
arrangement creates a moral hazard problem. In the long run it 
is a crucial problem to address. And of course, it is a focus 
of the debate at the IMF at present. I do however wish to note 
an irony here. And that is that those members who stand to gain 
the most from voting reform, that is the borrowing countries, 
are also those that have tended to oppose reforms on 
participation, anti-corruption, environment, and gender equity. 
Changing the voting formula is critical, it is important, but 
it is not going to solve this problem. Sunshine on board 
deliberations might help. A related major opportunity at the 
governance level is actually with national parliaments who 
frequently have no idea what the Bank is doing in their own 
countries.
    The Bank's founding articles of agreement prohibit it from 
the involvement in the political affairs of a state, but that 
does not mean that it can't promote better parliamentary 
scrutiny and oversight. Some civil society organizations have 
recommended that the Bank's executive board refrain from 
approving key documents and projects until they have been 
reviewed by the relevant national parliaments. In closing, I 
would like to emphasize once again that the Bank is a public 
organization with the mission of fighting poverty. Reforms that 
enhance accountability to the poor through better citizen 
participation will help it achieve its critical mission. Thank 
you for your attention.
    [The prepared statement of Professor Ebrahim can be found 
on page 78 of the appendix.]
    The Chairman. Next, we have Vijaya Ramachandran who is a 
senior fellow at the Center For Global Development.

  STATEMENT OF VIJAYA RAMACHANDRAN, SENIOR FELLOW, CENTER FOR 
                       GLOBAL DEVELOPMENT

    Ms. Ramachandran. Thank you, Mr. Chairman, and respected 
members of the committee. Thank you for this opportunity to 
share my views with the committee today. I, too, commend the 
Bank for this new disclosure policy. I think the Bank is a very 
important institution and we must make it work for poor people 
all over the world, but I also believe that the issue of 
accountability or real accountability, which this policy aims 
to address, is far more complicated than simply changing the 
rules on paper.
    I believe that despite this new disclosure policy, it is 
still unlikely that the Bank would really move to a true sense 
of accountability, accountability to poor people, 
accountability to its shareholders, and I think the reason that 
we are really struggling with this issue of accountability is 
that the Bank has this very singular focus on the volume of 
lending. And as long as the goal is to send as much money out 
the door as possible, there are very strong disincentives 
around the entire chain of command, from the staff on the 
ground to management in Washington, to admit when things are 
going wrong, to stop projects before they are completed, to 
raise doubts about things when situations on the ground get 
bad. I think rather than that there is an embedded culture; Mr. 
Miller mentioned the culture in his opening comments. I think 
there is an embedded culture and huge bureaucratic pressure to 
keep things going and to keep sending money out the door. In 
other words, country loans are simply regarded as the gold 
star. The single metric of success at the way the World Bank 
defines it. I think as long as we have this enormous pressure 
to lend at all costs or lend at any cost, we will not see real 
accountability emerge in these organizations.
    Releasing huge amounts of paper exposed or releasing 
information quicker than before might be a welcome step, but it 
is not going to be something that changes fundamentally the way 
the organization works as long as staff, management, and 
everybody else is defining success in terms of how much money 
is lent on any given year. People are very reluctant inside the 
organization to put their actual thoughts down on paper. And 
for us to read the paper faster or more of it is great. But as 
long as you have a culture of shoveling money out the door, 
without any concern when things go wrong on the ground because 
you have so much pressure to keep things going and keep lending 
volume up, I don't think we are going to see any real change in 
accountability in the truest sense of the word, by which I mean 
accountability to the poor.
    So I think the question now is, what can we do to change 
this culture inside the Bank and to move it to a system whereby 
we really do get real transparency and real accountability? I 
suggest two things in my testimony here. One is, I think we 
really do need rigorous external third party evaluation of 
projects. If we can define successful development outcomes, the 
number of children who are fed by a particular program or the 
number of children who benefit from delivery of basic health 
care services, then we have a real metric by which we can hold 
the Bank accountable. As long as the Bank does not do the 
rigorous third-party evaluation, we are left with metrics that 
measure inputs. And really even all the papers that you are 
going to get with this new disclosure policy is going to be 
more information on the inputs that are going into the Bank's 
work, rather than the outcomes, the title of this session is 
about successful development outcomes.
    We know little about that from what the Bank does because 
of this real sort of lack of emphasis on evaluation, rigorous 
third-party external evaluation of what the World Bank's 
projects actually accomplish on the ground. The other idea I 
suggest today is to think about how we might move the Bank away 
from this singular focus on loans. We might think about other 
products. We live in a very integrated global economy. Poor 
countries are demanding much more complex products than just 
the standard loan package that the World Bank offers and maybe 
we want to think about in particular risk mitigation products, 
catastrophic insurance, bonds that are linked to terms of 
trade, concessional grants or grant facilities that would 
deliver resources to countries in the wake of a natural 
disaster such as, for example, Indonesia experienced after the 
tsunami.
    I think we need to encourage the Bank to move to a 
different set of projects and a more diversified set of 
projects that are linked to actual need that can be measured in 
terms of development outcomes. And until we get to that point, 
I think we are going to be stuck within this endless sort of 
conversation of trying to improve transparency in an 
organization which measures its success by one thing only, 
which is how much money it sends out the door. To this end, I 
request you, the members of this committee, to provide guidance 
to the Treasury to link future capital increases of the World 
Bank and the other MDBs to third-party evaluation so we do know 
what successful development outcomes are, and to encourage them 
to innovate, give staff other things to do, to think about 
products that might serve countries in this new era.
    I think as long as there is pressure on the bottom-line for 
these MDBs from you and from other member, other shareholders, 
that will encourage the Bank to go down a different path and to 
change its embedded culture. Thank you.
    [The prepared statement of Ms. Ramachandran can be found on 
page 106 of the appendix.]
    The Chairman. Thank you. I will have to shift gears. This 
is the first time all year I thought about making financial 
institutions more complex. We have been spending a lot of time. 
They are not mutually exclusive necessarily. We may meet more 
in the middle.
    Finally, Thomas Blanton, who is the director of the 
National Security Archive at George Washington University.

  STATEMENT OF THOMAS S. BLANTON, DIRECTOR, NATIONAL SECURITY 
             ARCHIVE, GEORGE WASHINGTON UNIVERSITY

    Mr. Blanton. Thank you, Mr. Chairman, and members of the 
committee. I really applaud this hearing because congressional 
pressure from this body has been essential to every major 
reform the Bank has undertaken in the last 2 decades, for 
transparency and greater accountability. That is just a fact. 
And my prepared statement has 30 years of the struggles where 
congressional pressure made such a huge difference. I won't 
belabor that history. There is more of it there than you can 
possibly consume in this hearing or any other. What I want to 
do is bring today some attention to the international Freedom 
of Information movement because that is how my archive of 
national security documentation got to the point where we have 
something to offer to the debate over openness and 
international institutions.
    We were started 25 years ago to follow up Freedom of 
Information requests because it took so long to get information 
out of government. We made headlines every day. We got 
transcripts of Saddam Hussein's interviews with the FBI. We 
kind of serve as a snowplow in the secrecy blizzard and dig out 
some of the biggest drifts and hopefully keep the roads a 
little more open for everybody else. But the real point is that 
starting 20 years ago, folks like the dissidents in eastern 
Europe started coming to us and saying, we want to look at the 
secret documents, what does the CIA have on my country?
    And they would look at our documents and then they would 
say, wow, this is fabulous, why can't we get this out of our 
own records? I still remember a friend, Sergio Aguayo from 
Mexico, we published a bunch of documents in Mexico about one 
of the big massacres carried out by the government. And Sergio 
says in the major newspaper, why are we learning this from 
Yankee records, why don't we have our own right to know, our 
own Right to Information Act? And they went out and passed one. 
So over the last, about 2 decades, I have been going around to 
country after country after country helping folks write Freedom 
of Information laws that can make a difference, that can open 
up secret files, that can bring people into the process of 
decisionmaking, that can hold government agencies accountable.
    There are some lessons from that global movement that are 
directly relevant to the struggle with the international 
institutions to make them more accountable. And there are three 
kind of fundamentals. When Joe Stiglitz says we ought to make 
sure the World Bank disclosure policy at least rises to the 
standard of freedom of information laws, there are 
international norms today and they say fundamentally 3 things. 
There is a presumption of openness. That is, the governments--
the public bodies don't own that information. We own it. And 
with that presumption comes an obligation to put it out there 
before anybody has to ask for it. Proactive publication.
    Think about our own Federal Register in this country. Think 
about the ways in which we put out notice and comment of any 
rulemaking. There is an obligation to put it out there before 
people ask and that is a model. The second fundamental standard 
from the international freedom of information movement is that 
exceptions to that openness have to be as narrow as possible 
and with a serious harm test, meaning there has to be real 
evidence that the release of the information is going to damage 
something serious, like somebody's personal privacy or a 
decision-making process or the stakeholders involved. And 
usually when you apply a serious harm test, you end up with way 
more openness than you started with.
    And the third core principle is that you have to have 
independent review of the secrecy decisions. You have to have 
what Richard Bissell was talking about. You can't just have the 
board management committee making the decision on what gets 
released. It needs to go to the Inspection Panel. It needs to 
go to an independent body. In this country, we have Federal 
judges who look at that in Freedom of Information lawsuits. And 
you often get some great results when just you have separate 
entities looking at that process. Those are court norms. And If 
you get engaged in freedom of information campaigns around the 
world, really quickly you come up against not just national 
governments, not just former dictatorships, not just residual 
communist parties, you come up against multilateral financial 
institutions who are driving so much of the decisionmaking on 
development and aid that is taking place in these countries.
    So really quickly, as I went to places like India or the 
Philippines or South Africa or Argentina or Chile, you would 
run into the multilateral institutions and find that the things 
we were arguing for those countries to adopt, those 
institutions didn't even come close to those standards. And 
they still don't come close today. But there is a core lesson, 
I think, from 30 years of struggle to make them come closer to 
that ideal. And the core lessons are that pressure from the 
outside really works. Just in the period between the 
announcement of the draft disclosure policy this spring at the 
World Bank and today, we know from inside the Bank they have 
already changed it to fix criticisms made by the Global 
Transparency Initiative, by the Bank Information Center, by the 
Carter Center and others, they have already started to consider 
the release of summaries of board discussions, show who 
disagreed with whom. They have started to consider putting 
staff recommendations out to the public at the same time that 
the board receives them. That is a direct result of the 
criticisms from outside, the pressure from outside. That is 
lesson number one. Lesson number 2 is that congressional 
pressure really works. Congressional attention really works. I 
am really encouraged by this hearing and by this process; keep 
it up.
    And there is more to come, I hope. The third great lesson 
is even when the Bank makes just rhetorical commitments to 
openness, it gives us and you handles to keep the pressure on, 
on them. It is like what Martin Luther King once said when 
asked, why are you trying to pass a Civil Rights Act up in 
Washington, that is not going to change any of these racists 
down here in Mississippi, and he said something like, change 
the law and their hearts and minds will follow. You can hold 
people to their own standard, to their rhetorical commitments 
to their disclosure policy. So we have an obligation to make 
that as solid and strong as possible because it gives us 
leverage.
    And the final point, the lesson of the last 30 years of 
struggles is the Bank itself has to have reformers inside. They 
have to internalize it. It is that combination of outside 
pressure, congressional attention, and internal reformers that 
really make change. It is that old joke about the psychiatrist 
and the light bulb. How many shrinks does it take to change the 
light bulb? Only one, but the light bulb has to really want to 
change. The World Bank has to really want to change. And one of 
the reasons that it really wants to change its own disclosure 
policy today is that its own research from the World Bank 
Institute has shown over and over that openness measures like 
freedom of information laws are directly correlated with better 
development outcomes, better governance, and less corruption.
    So, Mr. Chairman, we have great lessons from our past 
struggles. I think our current job is to keep it up. Thank you.
    [The prepared statement of Mr. Blanton can be found on page 
40 of the appendix.]
    The Chairman. Thank you.
    And that is a good segue into my questions. I have been 
reminded by Mr. McGlinchey that the World Bank will be coming 
to us for a capital allotment next year and some of the others. 
And let me be very clear. Yes, we will not be voting more money 
unless there are some changes. Now, it has been pointed out to 
us, it was pointed out to us in the 1990's when we said that we 
wanted there to be the Inspection Panel and disclosure, that we 
could not compel the World Bank to make changes, and that is 
true. We, the Congress, couldn't. We could have our vote.
    We, in turn, pointed out while it was true that we could 
not compel them to make changes, they could not compel us to 
vote money. And that--I think it was a chance for them to 
understand a fundamental principle that has been very relevant 
legislatively in my own career that was best expressed 
musically and I won't sing it, but I will cite it. What they 
have learned is that the ankle bone is connected to the 
shoulder bone, that things that are logically separate are not 
necessarily politically separate. And I want to say now this 
committee--because I will be chairman no matter what happens 
through the end of next year--will not convene to take up the 
question of approving funding for the World Bank or any other 
institutions unless we get some further improvements. There 
have been improvements, but that involves the Doing Business 
report, that involves some of the issues we talked about here. 
And we are going to be reasonable. I just want to remind 
people, I am not claiming, as I said, to be all powerful. If 
everybody cooperates, getting increased funding voted as we saw 
with the IMF is difficult. If any of us who have a major role 
in that necessary job of assembling the support defects for 
various reasons, it becomes impossible. And I am simply noting 
that so what I want to ask then is--and my question here--but I 
am going to stick to the 5-minute rule. I am glad to see this 
kind of interest from the members.
    For written suggestions or conversations with our staff, 
what things should we be asking them do? And we want to be 
reasonable. But the third-party evaluation, obviously the 
question is, which third parties, and how do you structure 
them? I will say there is one thing we can do legislatively. 
Professor Stiglitz mentioned it.
    When I was chair of this subcommittee in the early 1990's, 
at one point, I invited the State Department to testify. And 
the Department of Treasury got very exercised. I was too junior 
at that point to do what I should have done which is to tell 
them to get over it. I think this is right.
    Part of the problem is--well, there are two structural 
problems. One, there has been very little parliamentary input. 
Our colleague from Wisconsin who is here, Ms. Moore, has become 
active in that under a group started by our colleague from 
Minnesota, Betty McCollum.
    In 1994, I convened in this room a meeting of 
parliamentarians from all over the world to deal with the IMF 
and the World Bank and we were able to get World Bank and IMF 
officials to appear before us which they could not do and 
should not do before any one parliament. That was in my last 
month as chairman of the subcommittee because elections 
previously had removed that from me. So it hadn't gone forward.
    I want to continue to work on parliamentarian 
interactivity. But it is also the case--and I think Joe 
Stiglitz mentioned it and a couple of others--that this has 
been too much the province of treasury departments. I think if 
in the 1990's with regard to Asia, the State Department had 
more of a role in America's formulation of policies at the IMF 
you would have seen less harshness, less ignoring of political 
reality. One of the great mistakes I think we made with this 
insistence on great austerity, even when budgetary excess was 
not the cause of the problem, was to discredit democracy. 
Because in many parts of the world, we were giving people two 
messages: One, be more democratic in your society; and two, tax 
the poor more, charge more for necessities, be tougher on 
labor. People came to associate those kinds of harsh increases 
in their lives with democracy. I think a State Department would 
have been more relevant, a labor ministry. So one of the things 
I am going to be talking about is legislation that will 
increase the participation here. I hope our European allies 
will deal with it. You take both some pride and some comfort 
from the fact that one of the members of the staff of this 
committee, Scott Morris, is now the Deputy Assistant Secretary 
at Treasury for international financial organizations. I 
believe we will have a very cooperative response on the part of 
this Administration. So I am going to end it now. Please submit 
to us concrete suggestions of things we can ask the Bank and 
the other international financial institutions to adopt because 
we do intend to use our power of the purse to acknowledge what 
they have done and to thank them. I will just--I will cite that 
1980 is the first time I ran for office and I had a difficult 
primary and then a difficult funding election. And after the 
primary, I wrote a letter to all the people who had given me 
money.
    And I said, I am going to make my mother very happy because 
I am going to use two of the things she told me to use, thank 
you for what you did, please give me some more. So we are going 
to say thank you, and not so much please, but here is the 
condition to move forward in these areas.
    Mr. Miller.
    Mr. Miller of California. Thank you, Mr. Chairman. I want 
to say we always say thank you to the panels. But I really 
enjoyed every one of you. Dr. Stiglitz, Professor, I know you 
thought you had 35 minutes. I saw you turning your pages at the 
end. It was 5 minutes. I know this is very difficult. But I 
would like to continue the conversation. And I enjoyed--and it 
went down--I kept saying I really liked that, I really liked 
that. You really did. You all were very, very good. You have 
great ideas. We are talking about disclosure policies that were 
last changed in 2001, 2002. But one thing I gleaned from what 
you are saying, you are talking about significant structural 
change at the World Bank is what you are talking about. And I 
am really glad to receive that testimony. I am not just trying 
to make you feel good.
    But your testimony really was excellent, even to the 
conclusion. You did a great job. You just ad-libbed it. You 
turned your pages as you were doing it. But we are talking 
about increasing transparency, and that is problematic in a lot 
of situations. Are we going to force deliberation into a more 
private setting, rendering this initiative ineffective by what 
we are trying to do? Is that going to be problematic from your 
perspective?
    Mr. Stiglitz. I want to echo one of the things that Mr. 
Blanton said, which is that the secrecy both of the IMF and the 
World Bank and of governments with commercial contracts is a 
real barrier to citizen involvement. When Mr. Frank talked 
about what should be the conditions, I think one of the 
conditions ought to be that this impediment should no longer 
exist. That, in fact, they should be on the other side.
    Mr. Miller of California. But his comment was to increasing 
transparency. Do you know the structure of the World Bank? Are 
they internally going to take their conversations more private?
    Mr. Stiglitz. Part of what we are talking about here is 
making the World Bank help be an enforcer of more openness 
within countries. For instance, before the IMF or the World 
Bank puts money into a country that is rich in natural 
resources, it has to subscribe to the extractive industries 
transparency initiative, because what sense does it make for us 
to be putting money into the country if it is in effect pouring 
money out and not getting the full value from its natural 
resources. We don't know if there is no transparency. That 
part, I think, is unambiguously positive. The other part is I 
don't think that the World Bank will make things secret because 
of the procedural issues that have been put forward. Before 
they adopt their program, if they make it a requirement that 
they put it out in the open like we do in our notice, they will 
have to have more transparency. They may have less public 
discussion, but at the critical points, there will be the kind 
of public disclosure that will enable more public 
participation.
    Mr. Miller of California. So the board meetings, if they 
were made more public, do you all agree that would be a 
beneficial move or would it be detrimental?
    Mr. Blanton. I think we have some tangible evidence that 
Joe Stiglitz published in looking at--this was the great fear 
when we made the Federal Reserve in this country more public. 
And Arthur Burns back in 1976, had all these quotes in there 
saying all this will be terrible, it will turn it into theater 
and it will increase volatility in the markets. Well, we have a 
few decades of experience showing that the opposite occurs. It 
is far more stable if the expectations are--the information 
flows keep up with what the market needs. That is a core lesson 
I think from market economics.
    The Chairman. If the gentleman would yield. By the way, you 
can thank Mr. Gonzalez up there. They used to not even announce 
the vote of the Open Market Committee for 6 weeks. How you 
decide to set monetary policy by not telling anybody what you 
were doing with secrecy above your objective, but I do want--
and thank you for yielding because I am told that one of the 
pending proposals that maybe this was mentioned was to release 
the transcripts after 10 years of board meetings, which would 
seem, I think to both of us, not enough. Any comments on this, 
on this proposal if you don't mind. That is the current 
wording. I do know that the gentleman's concern is that if they 
have to be released, maybe they will talk more informally. But 
they can do that anyway. I grew up politically in Boston where 
I was told early on to never write when you can talk, never 
talk when you can nod, and never nod when you can wink. So I 
assume some people already know how to do that. But what about 
this 10-year disclosure policy?
    Mr. Miller of California. That is fine. Sure.
    The Chairman. Does anybody have any comments on this 10-
year wait? Is that unreasonable?
    Mr. Bissell. I would just say with regard to the proposals 
being considered and there are not major improvements in 
release of the executive board documentation at this stage. The 
idea of waiting 10 years to know what was said at the board 
meetings is from our point of view overreach in terms of 
secrecy. They could release them in far shorter time so that 
people can understand the context in which decisions are made 
with regard to projects.
    The Chairman. That is fairly generally agreed to.
    Mr. Bissell. Could I add one other point about that? One of 
the key issues from our point of view is the deliberative 
documents that go into the board. This has to do with project 
appraisal documents and other documents that are prepared by 
the staff and drafted by the borrowing countries and so forth. 
Those documents actually are already floating around a great 
deal. The only people being denied access to those documents 
are the people who are supposed to benefit from the projects. 
In other words, they are shared among the borrowing 
governments, the project managers, the people all around the 
Bank. They are copied in thousands of copies. So we are trying 
to just move that to the point where people who really have a 
stake in it ought to be able to get access.
    Ms. Ramachandran. I think my concern about the 10-year 
period, and these documents more broadly is, are we actually 
able to use them to identify real concerns with these projects? 
Whether it be corruption, whether the project is not going 
well. And I think I still have a lot of doubts. I think the 
wording that is used when things are going wrong are things 
like institutional weakness or lack of capacity. People are not 
I think forthright enough when things are going wrong to stop a 
project because the culture is to not stop projects. And I am 
not sure disclosing these documents is going to help us judge 
whether these projects are working or not or whether the money 
is ending up in corrupt hands.
    The Chairman. Let me return the time which I took from my 
colleague.
    Mr. Miller of California. That is my pleasure. Is there 
concern on the part of the panel that the proposed appeal 
mechanism is going to be a direct arm of the Bank staff still? 
Would that in any way create an inherent bias?
    Mr. Blanton. Yes.
    Mr. Miller of California. What would you propose?
    Mr. Blanton. I think in Dr. Bissell's testimony, he 
specifically proposes using the Inspection Panel as an 
independent review process. This is actually what the 
international norm is in freedom of information. You can't let 
the folks who make the withholding decision also decide on the 
appeal of that secrecy decision. You have to create some 
independent review.
    Mr. Miller of California. And Ms., is it ``Ramachandran?'' 
I can't say it. I am from Arkansas. What do you expect?
    But you talked about how the effectiveness of a new policy 
will depend on its implementation and a buy-in basically from 
the staff and management. Is that going to be problematic?
    Ms. Ramachandran. That is, I think, where my concern is. If 
the incentives for staff are changed, you mentioned the 
embedded culture, I think that has to change for these 
documents to have real value and for us to be able to 
participate meaningfully in this process. As long as the 
embedded culture is the singular focus on loan volume, it is 
going to be very difficult, I think, for staff to actually put 
down their real thoughts, real concerns on these pieces of 
paper. That is kind of why I am arguing we need this external 
evaluation. I realize it is a difficult thing to do, but my 
colleagues at the Center for Global Development have thought 
about this very carefully. There are ways to do it.
    Mr. Miller of California. I agree with your testimony and 
your comments, and I thank you all. You were very informative, 
and I yield back.
    The Chairman. I am going to take 10 more seconds to say 
this because it is relevant. The one thing I hope we will never 
hear, and I think you suggested it, the Bank used to say to us, 
oh, well, we can't do that because the recipient country won't 
allow us to. You know, we have a constitutional question about 
whether the donor can put an unconstitutional condition on a 
gift, but I never heard of a doctrine that said that the 
recipient had the right to impose binding conditions on the 
terms in which the offer was made. So let the Bank please never 
tell us again, oh, we are sorry, but these people won't accept 
our money unless we do this or that.
    Mr. Miller of California. Will the gentlemen yield for 1 
second?
    The Chairman. Yes, I yield.
    Mr. Miller of California. Do you think it is appropriate to 
have some type of accountability to the policy being 
implemented of basically a punishment if you don't implement it 
properly on the part of the staff? There has to be some 
accountability to not doing your job if there is a bias on the 
part of staff.
    The Chairman. Why don't we get that in writing. I think 
that is an important question and one people look like they 
want to think about. So we would like that in writing.
    Next, the gentlewoman from California. Let me just preface 
this by saying that one of the great triumphs I think we had on 
behalf of trying to aid low-income people was the movement for 
debt relief for the highly indebted poor countries over the 
objection of the Clinton Administration and the Democratic and 
Republican leadership of the House by a coalition that included 
the gentlewoman from California, the gentleman from Alabama who 
was then a senior member of this committee, myself, and a 
former chairman of the committee, Jim Leach from Iowa. The four 
of us did do this on the Floor, and we got that debt relief, 
and it has clearly been very helpful. It has not resolved all 
the problems. So the gentlewoman from California comes with a 
great record of leadership in this area.
    Ms. Waters. Thank you very much, Mr. Chairman. I appreciate 
the leadership that you have provided on debt relief, and I am 
very proud of the work that we were able to do.
    I was just reviewing some of the history of the debt relief 
that we were involved with, and I suppose that this issue 
emerges as the most significant issue for being able to help 
developing countries. But I am interested in a statement that 
was made, I suppose, earlier. And I would like to follow up 
with--am I pronouncing your name correctly? Is it ``Stiglitz?''
    Mr. Stiglitz. ``Stiglitz.''
    Ms. Waters. Stiglitz. You mentioned earlier that one of the 
problems with the World Bank is that it is a development 
institution run by finance ministries, such as the U.S. 
Department of Treasury. As we have seen in our own country, 
whether it is former Secretary Henry Paulson or the current 
Secretary's Chief of Staff Mark Patterson, Treasury officials 
have often strong ties to investment firms. What kind of impact 
do you think this has on the World Bank's policies about debt 
forgiveness?
    Mr. Stiglitz. Almost surely it colors every decision, 
because if you are a creditor, the last thing in the world you 
want is debt forgiveness. There was an old joke during the 
Argentina crisis that the IMF couldn't take yes for an answer. 
Every time the IMF gave the conditions, if Argentina said yes, 
that meant they hadn't been squeezed enough, and they wanted to 
raise the conditions to make it more painful. They wanted to 
send a clear message that it is very painful to walk away from 
your debts.
    It is understandable from the point of view of creditors 
that you want to get repaid. But in the United States, we have 
bankruptcy codes. We have an understanding that sometimes you 
need a fresh start. I think this is just one of the examples 
where to whom you are accountable makes a very big difference 
in the behavior of the institution. In my written testimony, I 
gave some other examples of that kind.
    Ms. Waters. What suggestions do you have to reduce the 
influence of the finance community and increase the influence 
of the developing community at the World Bank?
    Mr. Stiglitz. The particular suggestions I had were that 
within our process in the United States, to try to make the 
World Bank accountable to an interagency process, and to make 
sure that, for instance, the views of Labor, State, and other 
departments get involved. I know for a fact, reflecting what 
the chairman said, that the policies in Indonesia would have 
been markedly different had the State Department been making 
the critical decisions rather than Treasury.
    Ms. Waters. Thank you very much, Mr. Chairman.
    The Chairman. The gentleman from New Jersey.
    Mr. Lance. Thank you very much, Mr. Chairman.
    Good morning to the distinguished panel.
    Dr. Ramachandran mentioned that the effectiveness of the 
new policy will depend on implementation and a buy-in from the 
staff and management. What incentives do you think exist where 
that will actually occur in fact and not just in principle?
    Ms. Ramachandran. I think it is a difficult question. My 
sense of the Bank is that staff promotions, staff rewards are 
all linked to the volume of lending. That is the only metric 
that the Bank has. I think if these promotions and hiring 
decisions and so on can be linked to a broader set of variables 
where staff are encouraged to say when things are going wrong 
that they are going wrong, that when corruption is emerging as 
a problem to stop a project midway, to think about a more 
diverse range of products for the world we live in now--I mean, 
these are not things that I think are yet being implemented 
inside the institution. It is still very much focused on loan 
volume.
    Mr. Lance. I would ask other members of the panel to 
comment as well. And let me say that I certainly agree 
completely with the chairman that we ought to move forward in 
this session regarding this issue, and I compliment the 
chairman for his remarks in that regard. But obviously our 
power is somewhat limited, and we have to work with other G-20 
countries, for example. But to other members of the panel, how 
do you think that we can get buy-in from the professionals who 
are there?
    Professor Stiglitz?
    Mr. Stiglitz. Actually, there are many staff within the 
Bank who are sympathetic with some of these views, so I don't 
think we should color this as black and white. I think in a 
sense it has to do with the leadership of the Bank, if they 
send a strong message. It is not just a question of incentive 
pay. It is sort of, you might say, the corporate culture.
    Mr. Lance. We are aware of that on this panel.
    Mr. Stiglitz. Corporate cultures can change. And I think 
that some of the things that we are talking about today could 
help change that corporate culture.
    Mr. Lance. Thank you.
    Professor Ebrahim?
    Mr. Ebrahim. The Bank does have a performance appraisal 
process for its staff, as any major organization does. In a 
sense that is partly where the rubber hits the road; that if 
there is a possibility to actually change that, to include 
elements that are very explicit about citizen engagement, about 
transparency, about the evaluation of outcomes not just at the 
closing of a project, but 5 years down the road, I think these 
are very tangible kinds of things that are possible to do. But 
in order for those performance appraisals to be taken 
seriously, they need to be connected to internal policies 
within the institution, which is why I believe a participation 
policy that actually mandates a look at participation within 
any project or policy would be crucial.
    Mr. Lance. Well, I hope through this hearing that the Bank 
takes notice of what we are discussing today. I am sure that is 
the case, but will actually act on that.
    Others who wish to comment perhaps?
    Mr. Bissell. I would just say that my experience on the 
Inspection Panel, which was very much bringing an alien body 
into the Bank to actually have the ability to examine from an 
independent point of view whether or not compliance with 
policies was occurring, generated widespread cooperation from 
the staff. And quite specifically in that context, it was 
directed in the resolution establishing the Panel that all 
documentation should be shared with the Panel.
    Mr. Lance. Thank you.
    Mr. Bissell. And we did not have a problem in that regard. 
We may have had a problem when the Bank considered the 
implications of what we found, and certain senior managers 
found that their position was threatened. But in the process of 
doing it, of simply carrying it out, in fact, there is a 
strong, I think, culture to follow if there are clear 
regulations which they should do as staff members.
    Mr. Lance. Thank you very much to the panel. And, Professor 
Stiglitz, let me say that when I was at Princeton, I think you 
were there, but I was too scared to take a course from you. I 
do believe I took a course from Professor Hanaway, but I was 
scared to take a course from you.
    Thank you, Mr. Chairman.
    The Chairman. The gentlewoman from New York.
    Mrs. Maloney. Thank you, Mr. Chairman, for your leadership.
    And I welcome all the panelists. Thank you for your 
testimony today. But in particular I would like to welcome 
Professor Stiglitz, who is not only a Nobel Laureate, but 
probably more importantly is a professor at an important 
university in the State of New York, Columbia University. So we 
appreciate your tenure and your work at this important 
university helping young people move forward who are not afraid 
to take your courses. But I would probably be with you, Mr. 
Lance, I would be afraid.
    In any event, related to the development outcomes in the 
World Bank is the meetings that are taking place by the G-7, 
now G-20. I believe it is next week they are meeting in 
Pittsburgh. And the G-20, I have been told, represents 87 
percent of the GDP, but 80 percent of the geography of our 
world is outside of the G-20. And I would like to ask whether 
you believe that those representing 20 percent of the geography 
can make proper economic policies for the 80 percent that are 
not part of the G-20. And I have been told that some developing 
countries, their treasury secretaries have made public 
statements that it is easier to borrow from China than from the 
World Bank or from the IMF, and I would like to hear your 
comments on that. And any time remaining related to the health 
of the World Bank is probably the most important issue we are 
confronting in this committee under the chairman's leadership, 
and that is regulatory reform. Any comments that you can make 
on how our regulatory reform will help the World Bank, the 
world economy, and what areas do you think are the most 
important for us to focus our sharp pencils on?
    Thank you all for being here. First, Professor Stiglitz.
    Mr. Stiglitz. Thank you. I think that there are two 
problems facing the G-20. One is political legitimacy. The 
countries that are there are somewhat arbitrarily chosen. Some 
are obvious, but some, for instance, representing the Middle 
East may not be. The other problem is inclusiveness, and that 
is the point that you mentioned, that, for instance, there is 
only one country from sub-Saharan Africa, South Africa, which 
is distinctly different from most of the other countries in 
sub-Saharan Africa. The result of that is that many of the 
decisions and focal points are markedly different from what 
would have been the case had there been more inclusive 
representation.
    Let me give you a couple of examples. One of them is that 
almost all the money that was given to developing countries, 
while it was a good thing that they recieved the money--almost 
all of it was channeled through the IMF, which meant it would 
be in the form of loans. We talked about the initiative for 
debt forgiveness and the importance of that in 2000. It would 
be a mistake for these countries to wind up in the situation 
that they were before with another overhang of debt. What was 
needed was more grants and less loans. Because of the legacy of 
the past with the IMF, many of the countries feel reluctant to 
accept these loans. It is politically difficult, to put it 
euphemistically, for them to accept money from the IMF. One of 
the reasons is this issue that we are discussing in the panel 
today, the lack of transparency. The fact is that countries 
always worry, are there some secret conditions that we don't 
know about? That is why these transparency disclosure reforms 
are so important.
    On the second issue that you asked about, regulatory 
reform, which is a very big issue, of course, about which you 
have been having many hearings, let me just make one comment. I 
think probably the biggest issue is what to do with the too-
big-to-fail, too-big-to-be-resolved, too-intertwined-to-be-
resolved institutions. The fact is that these institutions have 
an implicit subsidy, because what we have done in both the Bush 
and Obama Administrations has been to bail out bondholders and 
shareholders. That means that these institutions have a 
competitive advantage: everybody knows that if you buy a credit 
default swap from these institutions, you don't have to worry 
about counterparty risk, because if a problem happens, the 
government will bail them out. We need a comprehensive agenda 
for dealing with these too-big-to-fail, too-big-to-be-resolved, 
and too-intertwined-to-be-resolved institutions, which include 
taxes, restrictions on the degree of risk taking, more capital, 
and a whole variety of measures. There is no single instrument 
that can deal with the problem because it is very big, and the 
problem has gotten worse because the way we addressed the 
crisis has led to institutions that are even larger, relative 
to our economy.
    Mrs. Maloney. Thank you.
    The Chairman. Thank you.
    I just want to respond briefly to that; I agree. And the 
two things that you mentioned that are in our jurisdiction, 
restrictions on too much risk taking, basically from 
derivatives in part, and greatly increased capital, we will be 
legislating. The only thing I differ with you on is I think 
when we are through, too-big-to-resolve will not be the 
problem. We intend to amend that statute so nothing will be 
too-big-to-resolve. And we do think with these--I agree with 
you it has to be a package. We won't have taxes. But we will be 
mandating a resolution authority that I think will be adequate 
to the task.
    Mr. Stiglitz. Can I just make one comment? It is not just a 
legal issue. Let's say that you had the legal authority right 
now, or you had it 12 months ago. My view is that both 
Administrations would have said that if they used that power to 
resolve the banks in a way that would have harmed shareholders 
and bondholders--
    The Chairman. Let me break through here. First of all, I 
have to differentiate. We have not done a great deal, and they 
have not done a great deal. It has been the executive entry 
shareholders. Bondholders, yes. Shareholders have not done 
well.
    Mr. Stiglitz. Not done well, but they--
    The Chairman. Well, shareholders--for instance, in Fannie 
Mae and Freddie Mac, shareholders were wiped out. In Bear 
Stearns, the shareholders were essentially wiped out. 
Bondholders have done better.
    But secondly, the problem is--and there is a question of 
legal authority--their interpretation now is either they put 
them in a bankruptcy with no alleviating things, or they pay 
off everybody, because if they start to pay off somebody and 
not others without bankruptcy, somebody can sue. What we are 
going to give them is the ability to pay off some and not 
others, which is the way out of that issue.
    Let me go on now to Mr. Posey.
    Mr. Posey. Thank you, Mr. Chairman, and thank you for your 
interest in this subject.
    I want to thank Mr. Blanton for the depth of your written 
testimony and the examples of intentional or unintentional 
misguided loans to the Philippines, Brazil, India, Chile, 
China, etc., and any more that you ever feel like telling us 
about, please feel free.
    Also, Ms. Ramachandran, you had indicated, I guess, in your 
written testimony that oftentimes the money is ill spent and at 
worst ends up in corrupt pockets. Could you give us some 
practical examples of that?
    Ms. Ramachandran. I think there have been examples that 
have been discussed recently in the media. The loan to India, 
which was clearly being sort of frittered away through midlevel 
corruption in the government. It took a very long time for the 
World Bank to respond to the queries that were being made in 
the Indian press, in Washington by organizations that watched 
the Bank. I think there was an enormous reluctance to stop this 
loan. It was a very large loan. And, you know, this was sort of 
at the core of business. And it was really only eventually 
addressed when the external pressure became so much that the 
Bank had to respond.
    Another case that I can think of recently is the tourism 
project in Albania where through a series of bad decisions, a 
lack of paying attention, and some ignorance, a number of small 
homes in a very poor village got demolished unintentionally, 
and that created an enormous sort of backlash for the Bank.
    I think the question I have when looking at these kinds of 
projects that go very wrong is, can we put in place systems 
where we can respond to these signals earlier, because in both 
cases we had signals that things were going wrong quite early 
on, but it took months and in some cases more than a year for 
the project to grind to a halt.
    I am happy to send more examples to you.
    Mr. Posey. I would appreciate it. Thank you.
    And for anyone who would want to answer this, how does the 
World Bank's proposed approach compare to that of other 
multilateral institutions such as the IMF? Are there 
differences in their respective policies that can make the 
World Bank proposal more effective or less effective? Do any 
other institutions take the exceptions list approach as opposed 
to a positive list of items which may be disclosed? And then, 
you know, what should the Bank's goal be when crafting such an 
information disclosure policy?
    Mr. Bissell?
    Mr. Bissell. That is a very good question. And, in fact, 
there is an extensive survey that I can provide you put 
together by the Global Transparency Initiative, which is a 
group of organizations that have literally gone through and 
catalogued all of the characteristics, including things like 
which operate on a presumption to disclose approach and that 
sort of thing. And I think in that you will understand the 
array of policies across the international community and why it 
is relatively inconsistent.
    On several of those points you just asked about, the World 
Bank is not different from most of the other international 
financial institutions. They have roughly the same standards, 
although several of them are thinking about strengthening them 
just as the World Bank is. And that is why I said in my 
comments that this is an important opportunity for the World 
Bank to show how one can build a responsible new disclosure 
policy that actually advances it down the road, and it also 
enables the institution to work better. And I think you will 
see a strong precedent effect from what the World Bank does on 
the African Bank and Asian Bank and Interamerican Bank and so 
forth.
    Mr. Posey. Mr. Ebrahim?
    Mr. Ebrahim. Just one other comparison with the IMF, and 
this is not on transparency, but it is on governance reform. 
The IMF generally has been really pretty far behind the Bank in 
terms of developing explicit internal policies. But on 
governance reform, surprisingly actually, it has been having 
quite a debate this past year, galvanized by a couple of 
internal reports, and the latest was, I think, just delivered 
last week, a report from a collection of civil society 
organizations. That will be something that they will actually 
discuss with the managing director at the meetings, the Bank-
IMF annual meetings, in Turkey next month.
    So I think there may be something to be learned about 
governance reforms by looking at what the IMF is talking about 
since actually a lot of the governance challenges are similar.
    I did want to mention one additional point also related to 
this question about corruption, and that has to do with 
monitoring and evaluation of projects. The people who are the 
most able to actually know what is going on on the ground are 
the project-affected communities. The Bank has a very explicit 
project cycle with stages along it where there are certain 
kinds of reviews when the Board gets involved, different levels 
of the organization get involved. And in that project cycle, 
there are actually very explicit opportunities for 
participatory monitoring and evaluation, and there is plenty of 
evidence that getting people involved that are actually being 
affected by the projects contributing directly to monitoring an 
evaluation can reduce corruption.
    The Chairman. The votes are going on. I have a proposal to 
make. We can get in two more questions. This is the first vote. 
We can get in Mr. Meeks and Mr. Moore. We then have only one 
15-minute vote followed by the recommit. That means if Members 
who have not yet asked questions want to go over and vote and 
then come right back, I will come back. We will have a half-
hour in which we can accommodate these four, because there is 
only the one vote, then the 10 minutes of debate and the 15-
minute roll call on recommit.
    So I would advise the other four members, you go over 
there. I promise to vote and come back. If the witnesses can 
wait, give us about a 20-minute delay, we can then finish 
everybody, because this has been a hearing with a lot of 
interesting people. And with that, we will be able to get in 
Mr. Meeks and Mr. Moore for 5 minutes each.
    Mr. Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    I think Mr. Watt had indicated that we just came back from 
a trip to Africa, and one of the things I think that we found, 
which is critical in the development with reference to 
development efforts, is that there is very little analysis, a 
methodical analysis, that can be done to draw long-term 
conclusions of causality between aid and development efforts 
and the success of their stated missions.
    More specifically what I am saying is countries that emerge 
as success stories, I think, as you said, as well as those that 
become economic and social disasters, are typically due to 
their own internal leadership, both political and military.
    And what we found on the ground, for example, and the 
reason why we selected certain countries, one being Rwanda, is 
that in 15 years, we saw that they had made some significant 
progress due to their own internal leadership and determination 
to make a difference. And as a result there seems to be some 
projects that can work, but because they are such a small 
country, they don't generally get the attention that they 
should from the World Bank or some other financial 
institutions, nor is there the coordination at all--and we were 
there to see the African Development Bank about their 
transparency--but coordination with the small or other IFIs who 
are on the ground and who could make sure that certain of the 
projects are working.
    And it seems as though when we talk about success, the 
World Bank is doing this, and the ADB is doing that, and the 
IMF is over here, and that whole piece coming together to help 
a development happen is not happening on the ground. And as a 
result, you know, what I found in the countries that we went 
to, the ADB, for example, had greater credibility or much 
greater credibility than the World Bank because of how they 
handle things on the ground. And the ADB was very clear in 
certain countries that they were not going to invest in because 
it was not stable on the ground.
    So my question is--for example, let's use Rwanda. How can 
we expect a small country like Rwanda, who I think is on track 
to make a great economic recovery story, how can we carry 
greater sway and attract a greater proportion of greater 
resources from the development communities so that they get 
success stories as opposed to--for example, I know the World 
Bank and its IFC, International Financial Corporation, you 
know, its role attracting private dollars. I look at what has 
taken place, for example, in Ghana. I know that there are 
people who have been investing there in the oil fields. The 
government changed, then some of the deals that were supposed 
to have happened now they say they want to renege on, and so 
you have those kind of problems, and so you have another 
project that looks like it is not going to be successful.
    So I am just throwing it out to the panel. How can we have 
better coordination and/or attract better attention to those 
governments even if they are small countries, even if they are 
small, where governance is working?
    Mr. Ebrahim. I think there are a couple of ways to think 
about that. One is the Paris Declaration on Aid Effectiveness, 
and it was followed on by the Accra Agenda for Action, 
essentially quasi agreements between especially bilateral 
donors, trying to look at what are the critical issues 
especially for coordination and country ownership. And they 
actually lay out some relatively measurable kinds of outcomes 
for coordination. What does it mean for a country to take 
ownership of all of the development work occurring within it?
    Essentially, it seems to me that critical to this is not 
just the coordination among donors, but building the internal 
capacity in a country like Rwanda. To be able to oversee what 
each different donor is doing, this requires capacity at the 
level of the executive branch of government, but also some 
degree of oversight by parliamentarians in terms of what is 
happening by different kinds of donors. And so unless that 
feeds into national development planning, I have a hard time 
imagining how one can get that kind of coordinated action. And 
so perhaps by actually asking multilateral institutions, as 
well as our bilateral agencies, to coordinate and to feed that 
through both executive as well as legislative branches to 
enable that coordination, I don't see how else it can happen.
    The Chairman. Mr. Moore.
    Mr. Moore of Kansas. Thank you, Chairman Frank, for holding 
this important hearing. I think we are all very committed to 
improving transparency and oversight of any financial-related 
organization, firm or activity. Transparency and oversight 
encourages better public policy decisions.
    As an example, almost a year ago, when this committee 
received a three-page TARP draft report from Secretary of the 
Treasury Paulson, what amounted to a $700 billion blank check, 
we said, thanks, but no thanks. Instead this committee, led by 
our distinguished chairman, added layer upon layer of oversight 
protection creating a three-pronged approach: One, ongoing 
audits by the GAO; two, criminal investigations through the 
Special Inspector General for TARP, or SIGTARP; and three, 
policy oversight through the Congressional Oversight Panel led 
by Professor Elizabeth Warren. These efforts and vigilant 
oversight of TARP have led to better protection, I believe, to 
United States taxpayers and hundreds of pages of oversight 
reports that anyone can access online and read for themselves.
    So turning to the World Bank, Professor Stiglitz, would it 
be helpful to have a similar oversight approach, encouraging 
decisionmaking to be as open and transparent as possible that 
is accessible to the general public? And I would like to ask 
the same question to the other witnesses if you have a comment 
after Professor Stiglitz. Please, sir.
    Mr. Stiglitz. Yes, I think the answer is yes. Let me just 
really congratulate you. Particularly, I followed the work of 
the Congressional Oversight Panel on TARP, and they have done a 
fantastic job. The information that has been disclosed, for 
instance, on the deals that were done in the first set of 
transactions have really been an eye-opener. I think they 
should have gotten more attention, as they are really 
important. I think that kind of framework is one that needs to 
be generalized to other public bodies.
    Mr. Bissell. I would just add that there is a very 
interesting experience after the establishment of the 
Inspection Panel in 1993 and the first year or two of the Bank 
experiencing the impact of independent review, of its projects 
was that, in fact, it spawned within the Bank several bodies 
that were established to try to head off the kinds of problems 
that were being identified. For instance, the Quality Assurance 
Group was created by the President because they all of a sudden 
recognized that there were probably quite a number of projects 
that were in equivalent trouble and wanted to fix before they 
reached the Inspection Panel. And then they subsequently 
several years later reorganized the evaluation function, called 
the OED, into the Independent Evaluation Group to try to 
enhance its effectiveness in the same front.
    So sometimes, rather than having to legislate all these 
layers you were describing on the U.S. experience into the 
Bank, simply getting the snowball rolling causes the Bank 
itself to create internal mechanisms to try to get it right. 
And that doesn't mean they have gotten it fully right, but that 
they saw the opportunity to strengthen their development 
effectiveness.
    Mr. Moore of Kansas. Thank you, sir.
    The Chairman. Let me just say that we are going to leave 
right now. The motion to recommit is now being voted on. There 
may be people who want to come back. I will ask you to wait. I 
will let you know in 10 minutes, because it could be people 
could vote on the motion to recommit, and there are four or 
five Members, some of them may want to come back. I won't hold 
you excessively. If you can give us about 10 minutes, I am 
going to go over and vote, and I will call over. If any Members 
want to come back and ask you questions, they will. Otherwise I 
thank you. It has been very useful. And please take me 
seriously about written suggestions.
    [Whereupon, at 11:40 a.m., the hearing was adjourned.]


                            A P P E N D I X



                           September 10, 2009

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