In 1947, American newspaperman Jay Reid, the first press officer hired by the newly created International Monetary Fund (IMF), walked into the IMF managing director's office in Washington.
"What shall I be telling the press?" Mr. Reid inquired, upon introducing himself.
The managing director scrutinized the ceiling for ten seconds, looked the newsman in the eye and said: "Mr. Reid, you tell the press NOTHING ."
Although the world's chief money-watching body is less secretive today, the 2,600 bureaucrats who work within the IMF's maze-like, monochrome headquarters on 19th Street remain far more mum than experts believe they should be.
"Obviously it's in everyone's interest that our operations become more transparent," acknowledges Graham Newman, the IMF's current director of information. Even short tours of the building by reporters require higher-level approval.
Quick to stamp documents "confidential" and "for internal circulation only," IMF bureaucrats feed suspicions, however unfounded, that they are dictating the destinies of dozens of nations - and some 1.4 billion people - from behind closed doors.
Indeed, some critics contend that as a key player in the Asian financial crisis, the IMF is deciding the economic conditions of life for hundreds of millions of people in Indonesia, Thailand, and South Korea, the world's 11th largest economy.
"The IMF is invested with too much power; no single agency should have responsibility for economic policy in half the developing world," argues Jeffrey Sachs, head of the Harvard Institute for International Development in Cambridge, Mass.
IMF staffers lack the knowledge to design subtle solutions to countries' financial problems, Mr. Sachs says.
The charge is bolstered by the agencies own recent admission that its Indonesia strategy backfired, in part because the IMF's Washington headquarters miscalculated how a jittery public would react to threatened bank closings.
A few prominent economists go further, stating that the IMF does more harm than good and should be disbanded in favor of free-market forces. These include Milton Friedman, a senior fellow at the Hoover Institution in Palo Alto, Calif., who denounces the IMF as an "international busybody."
A meddling force?
Yet other experts contend that this image of the IMF as the meddling taskmaster of the world economy is misleading.
On the contrary, they say, the 182-nation body is hamstrung by restraints on its powers imposed by member nations. As a result, they say it lacks the authority necessary to succeed in the increasingly complicated, demanding role of global currency manager.
"The IMF is inadequate to meet the conditions of modern, open capital markets," says Barry Bosworth, an economist at the Brookings Institution in Washington. "It is acting as a lender of last resort ... but it doesn't have the power to regulate financial transactions."
A look at how the IMF works lends credence to the view that, despite a lack of openness, the organization's influence over world monetary affairs is less monopolistic than some portray it to be.
Created in 1944, the overarching mission of the IMF is to monitor flows of money between nations and help make adjustments when needed.
The organization is run day-to-day by a 24-member executive board, including 16 representatives elected by groupings of smaller nations and eight representatives appointed by the biggest IMF fund contributors: the United States (18%), Germany (5.7%), Japan (5.7%), France (5%), the United Kingdom (5%), Saudi Arabia, Russia, and China.
Voting rights on the board are weighted according to the size of each member's contributions, which last year totalled more than $200 billion (compared with $7.6 billion in 1945). This system gives the United States a strong voice, although most board decisions are reached by consensus without formal voting, Mr. Newman says.
The major functions of the IMF are threefold:
Exercising "firm surveillance" of member nations' economies through data gathering, regular discussions with key finance officials, and annual country reports that include economic advice.
Providing technical support to member states in areas such as statistics, budgets, taxation, and central bank management.
Issuing loans to countries with international payments problems.
Member countries are free to ignore advice from the IMF, and often do. But that situation changes dramatically when a crisis erupts and a country needs loans.
Before loans are issued, the country's government must sign a letter of intent in which it agrees to carry out an economic reform plan approved by the IMF executive board. And the IMF leverage doesn't end there.
"We are not always trusting and we recognize that things can go wrong, so we don't give them all the money at once," Mr. Newman explains. To continue to receive loan disbursements, the country is expected to meet specific "performance criteria" within a set time-line.
The policy strings attached to the loans are often unpopular because they usually require austerity measures that may cause worker layoffs, bankruptcies, and even recession. Economic restructuring plans, modeled after the relatively open and efficient US financial system, also face resistance from governments that favor more closed forms of capitalism.
IMF loan packages can quickly restore confidence in a flagging economy by reassuring local and foreign investors, as demonstrated recently to a degree in South Korea.
But because the IMF lacks the authority absent a crisis to regulate the monetary system, the problems are likely to reoccur, says Mr. Bosworth. Indeed, today's complex world financial system, with its huge, rapid capital flows and lemming-like investor sentiments, is far more prone to sudden crises than the more segmented, state-dominated economic order more common in the 1950s, '60s, and '70s.
The risk of ongoing disruptions is exacerbated when the IMF bails out big foreign lenders in downward spiralling economies, as in Korea, economists warn.
"I give the fund high marks, except for one category: It's been too ready to bail out large uninsured creditors," says Morris Goldstein, a former senior IMF economist. "We don't want them to be shielded; otherwise in the future they won't be careful," says Mr. Goldstein, raising the so-called "moral hazard" of IMF bailouts.
Yet currently, the IMF's power to prevent such dislocations is limited to urging member nations to take its advice or, as recently in Asia, trying to enlist neighboring countries to exert "peer pressure" toward the same end.
The IMF is encouraging members to divulge more about their financial data and capital markets, but faces significant resistance.
As for transparency within the IMF itself, Newman stresses that the fund is taking strides to become more open. But it's still slow going. "We opened the archives," he announces, then adds with a look of chagrin, "for anything older than 30 years."