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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 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

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 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

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 

(1) 

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 

2 

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 lowestincome 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. 

3 

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. 

4 

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 

5 

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 fundaVerDate Nov 24 2008 15:49 Mar 04, 2010 Jkt 054864 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\54864.TXT TERRIE
6 

mental 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.] 

7 

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 InspecVerDate Nov 24 2008 15:49 Mar 04, 2010 Jkt 054864 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\54864.TXT TERRIE
8 

tion 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. 

9 

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 

10 

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 acVerDate Nov 24 2008 15:49 Mar 04, 2010 Jkt 054864 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 K:\DOCS\54864.TXT TERRIE
11 

countability, 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 thirdparty external evaluation of what the World Bank’s projects actually accomplish on the ground. The other idea I suggest today is 

12 

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 SadVerDate Nov 24 2008 15:49 Mar 04, 2010 Jkt 054864 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\54864.TXT TERRIE
13 

dam 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 dicVerDate Nov 24 2008 15:49 Mar 04, 2010 Jkt 054864 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\54864.TXT TERRIE
14 

tatorships, 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. 

15 

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. 

16 

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 iniVerDate Nov 24 2008 15:49 Mar 04, 2010 Jkt 054864 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 K:\DOCS\54864.TXT TERRIE
17 

tiative 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 

18 

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? 

19 

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. 

20 

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 

21 

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 implicaVerDate Nov 24 2008 15:49 Mar 04, 2010 Jkt 054864 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\54864.TXT TERRIE
22 

tions 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 

23 

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, toobig-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-tobe-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. 

24 

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? 

25 

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 BankIMF 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 

26 

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. 

27 

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 

28 

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.] 

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