The new HBO movie Too Big to Fail, based on the bestselling, fly-on-the-wall account of the financial crisis, is told almost exclusively from the perspective of former Treasury Secretary Henry Paulson. But there is one European politician who comes in for an appearance: French Finance Minister Christine Lagarde.
Ms. Lagarde, who officially announced her candidacy to lead the International Monetary Fund on Wednesday, is portrayed delivering a powerful rebuke over the phone from Paris to Mr. Paulson in Washington. She criticizes him for allowing Lehman Brothers Holdings Inc. to collapse, an event that triggered financial chaos around the world.
That Ms. Lagarde was written into the first Hollywood recreation of the collapse of the global financial system in 2008 will surprise no one involved in those events. She was a key participant in every major decision: First with the global effort to reverse the financial crisis, and then with Europe's battle over the past year to save a bunch of its countries from default.
"Christine Lagarde is an exceptionally capable person, an excellent mix of financial and economic knowledge, talent and the kind of political skills you need to navigate in this context," U.S. Treasury Secretary Timothy Geithner said at an event in Washington on Wednesday.
Ms. Lagarde, 55, will need to draw on all that goodwill as she seeks to replace Dominque Strauss-Kahn, the former French finance minister who resigned as the IMF's managing director last week to concentrate on his defence against sexual assault charges.
Her challenge is not so much winning. Ms. Lagarde enters the competition with the full backing of the European Union, whose members control about a third of the votes on the IMF's executive board. Her lone challenger at this stage, Mexican central bank governor Agustin Carstens, so far has the declared support of only his own government.
However, the enthusiasm with which EU countries have rallied around Ms. Lagarde has drawn accusations that Europe is attempting to game the selection process in order to avoid relinquishing its hold on a position that has been filled by one of its own since the IMF's inception in 1946.
In 2009, the Group of 20 major economies agreed that the next leaders of the international financial institutions would be chosen in an open, transparent and merit-based process. It was widely assumed that the next leader of the IMF would be a non-European.
The IMF executive directors from Brazil, Russia, India, China, and South Africa questioned the legitimacy of the selection process in a joint statement on Tuesday.
"I'm not totally pessimistic but I'm not at all optimistic" about the prospects for an emerging market representative to head the organization, Arvind Virmani, who represents India and three other countries on the IMF board, told Bloomberg News in an interview. "There is no indication which suggests that the result will be any different this time."
The discontent of emerging market countries with the selection process is echoing in Ottawa. "I think it is important that the process be open, merit-based and transparent," Finance Minister Jim Flaherty told reporters on Wednesday. "And that's certainly a concern that has been expressed by some of the emerging economies, many of whom are members of the G20."
On paper, Ms. Lagarde is in tough against Mr. Carstens.
For one, she lacks formal training in economics. And at a time when the IMF is coping with a personal scandal of its former leader, Ms. Lagarde is facing legal issues of her own over her resolution of dispute that resulted in an arbitration award worth the equivalent of $550-million going to a supporter of French President Nicolas Sarkozy. She denies doing anything wrong.
Mexico's central bank governor also has served as finance minister and in an array of senior positions at the IMF, including deputy managing director. In 2003, under Mr. Carstens's leadership as a senior finance official, Mexico became the first developing country to issue bonds with built-in agreements on what would happen in the case of default. According to Stanford University economist John Taylor, the innovation radically changed attitudes about emerging-market bonds.
"Since then, Mexico and most other large emerging market countries have been much stronger and weathered the financial crisis much better than anyone expected," said Prof. Taylor, who was Mr. Carstens's counterpart at the U.S. Treasury at the time. "Agustin Carstens is one of the most experienced and knowledgeable leaders in the international financial community."
Mr. Geithner also described Mr. Carstens as an excellent candidate Wednesday, although it was more effusive in his praise of Ms. Lagarde. "I know them both very well," Mr. Flaherty said. "They're both highly qualified."
For her part, Ms. Lagarde, who joined the French government in 2005 after running a Chicago-based law firm, said she hoped to win over the broadest constituency possible. To do that, she is playing up the intangibles that have made her an international political star. "If I'm elected, I'll bring all my expertise as a lawyer, a minister, a manager and a woman," she said in Paris, according to Reuters.