More Problems After Wolfowitz

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Indeed, the bank's staff association called for his resignation weeks ago, arguing that he could no longer be an effective leader.

The next bank head will need to fill several high-ranking positions left by longtime staffers who decided they could not work with Wolfowitz and his small coterie of political allies imported from the White House and Pentagon. To rebuild morale and to get the bank functioning normally once again, "it's necessary that the next president must adopt a much more collegial work style," says Truman.

A Broader Mission?

The new president and the old board also will face fundamental questions about the bank's role in the 21st century. Its mission of reducing poverty by spurring economic growth in the developing world is not likely to change. But amid a plethora of international financial aid efforts, ranging from the Bill & Melinda Gates Foundation to the Chinese government and Venezuela's Hugo Chávez, the bank has to find a niche that best uses its economic-development expertise and targets its limited financial resources.

"In the 1940s, when the bank was formed, founders like [John Maynard] Keynes couldn't imagine problems like avian flu and climate change and AIDS and money laundering crossing borders," says Birdsall.

Some board members would like to continue Wolfowitz's anticorruption efforts to make sure that less of the money loaned by the bank is siphoned off by crooked government officials in recipient countries. Others would like to focus on dealing with complex issues such as AIDS and global warming that are low on the economic priority lists of poor countries. That's a far cry from the bank's first transaction in 1947, a $250 million loan to France for post-war reconstruction.

Countering Islamic Fundamentalism

William Galston, a former policy adviser to President Bill Clinton, says the World Bank could assist U.S. efforts against Islamic fundamentalists by focusing more attention on getting aid recipients to govern more effectively. "Everywhere we look, we find that at the heart of the radicals' appeal is a very concrete claim that states are not delivering basic services to their people," says Galston, a public policy professor at the University of Maryland.

If the Wolfowitz scandal paralyzes the World Bank, American economic influence in the developing world is likely to wane. Already, Europeans contribute more than twice as much as the U.S. to World Bank loan funds. If major European nations decide to shift money to the European Union or to their own bilateral aid organizations, the clout of the U.S.-led bank would shrink. "It would be a big loss to U.S. leadership if the World Bank is no longer the premier institution," says Birdsall.

Richard S. Dunham is a senior writer for BusinessWeek.