'Overconfident' IMF downplayed risks in run-up to financial crisis

[CHIMO]

A damning report on the International Monetary Fund's failings in the run-up to the global financial crisis has blamed "groupthink" and "intellectual capture" for the inability of the Washington-based organisation to spot Britain's looming banking crash.

The body set up to monitor the IMF's performance said risks were downplayed, light-touch regulation lauded and overconfidence displayed in the resilience of banks in the City and on Wall Street that proved to be vulnerable when the mood turned sour in the summer of 2007.

In a 50-page assessment peppered with harsh criticism, the IMF's independent evaluation office (IEO) said few clear warnings had been provided about the risks and vulnerabilities of the global financial system in the years from 2004 to 2007. It highlighted a health check on the UK in 2006 that said banks were in good shape, praised City regulation and expressed few concerns about the mortgage market.

"During the run-up to the crisis, the banner message of IMF surveillance was characterised by overconfidence in the soundness and resiliency of large financial institutions, and endorsement of the financial practices in the main financial centres. The risks associated with housing booms and financial innovations were downplayed, as was the need for stronger regulation to address these risks."

http://www.guardian.co.uk/business/2011/feb/09/imf-downplayed-risks-financial-crisis-report

[Nuclear Unicorn]

1. Geithner used to work for the IMF

But you'd never know it judging from his tax returns.