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Sex Scandal Stuns IMF And Throws Bailouts Into Question

Fin - Daily Ticker - US

The boss of the International Monetary Fund, Dominique Strauss-Kahn, was arrested in New York this weekend after allegedly sexually assaulting a hotel maid.

Strauss-Kahn, who is (or was) also a leading candidate to challenge Nicolas Sarkozy for the presidency of France, was plucked out of the First Class cabin of an Air France flight about to take off for Paris after apparently leaving his hotel in a hurry. He then spent the night in a New York jail cell and was arraigned today.

Strauss-Kahn's attorneys says he denies the charges, and rumors immediately began circulating that Strauss-Kahn was "set up." Regardless, the IMF has already appointed an interim managing director, and the charges will almost certainly mean the end of Strauss-Kahn's possible presidential campaign.

In his tenure at the IMF, Strass-Kahn has been a big proponent of the bailouts that Europe has used to stave off another financial crisis. As Greece appears to be on the verge of descending into chaos again, Strauss-Kahn's incapacitation throws more uncertainty into the situation. Strauss-Kahn was supposed to attend meetings this week to figure out what to do next, and now, it seems, he is unlikely to attend them.

The IMF says it is operating normally, and one expects than an interim managing director will probably uphold the organization's recent policies. But with European citizens getting ever more sick of bailouts, and with the renewed crisis in Greece serving as a vivid example that bailouts just paper over problems, it's possible that Strauss-Kahn's arrest could have an impact.