They lend billions of dollars each year to the developing world, much of it subsidized by the U.S. taxpayer. Yet the multilateral development banks (MDBs) still operate in a world of their own, largely unaccountable to the countries in which they operate; to their own employees and contractors, who enjoy few rights; and to much of the U.S. government, even though some have their headquarters in Washington. As a series of recent corruption scandals at the Inter-American Development Bank (IDB) demonstrates, only outside pressure - particularly the watchful eye of the press and timely intervention by the U.S. Congress - is likely to change institutions whose claimed long suit is making such change happen in the Second and Third Worlds.

The World Bank, the Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development and the IDB have in recent years undergone serious restructuring of their roles in some ways that have undermined their development promise, say banking insiders. In recent years, the critics allege, more than one-third of the money lent by the MDBs has come in the form of "structural adjustments" or other officious-sounding loans that often have little measurable or sustained impact or collateral effects.

These loans do allow, among other things, for foreign commercial banks to be repaid on bad loans they made in the free market. Instead of schools, water treatment and other infrastructure improvements, complain citizens from heavily indebted borrower countries that eventually have to repay those loans, they are subjected to economic strangulation. They say threats from the bankers include selling off public assets in noncompetitive markets short of information, or legal safeguards or other changes that form part of a shell game played out among corrupt local political and financial elites and international private bankers anxious to avoid the market consequences of risky lending.

What infrastructure building is left over too often is decided by those same local elites and multinational businesses whose frequent lack of concern about the welfare of the people and basic development are increasingly well documented, according to critics of the international bankers. What's more, they say, the MDBs use public money in a private "culture of approval" for loans no matter what the consequences - after all, the business of the banks is lending, and there is no record of a manager ever being fired for lending too much money.

For their part, the MDBs and cooperating local banking institutions say that the multinational bankers tend to enter the picture at moments of grave crises when stringent reform is necessary to prevent catastrophe.

At this point the question tends to arise: Who will reform the reformers? A related concern for U.S. officials and taxpayers is the claim of the MDBs that they are to varying degrees above U.S. or even international law. Their claim of "sovereign immunity" has in recent years kept U.S. small businesses from being able to sue the MDBs for engaging in fraud, and effectively silenced internal whistle-blowers who find "doing the right thing" not only a ticket for dismissal but deportation as well. In a post-9/11 world, some are beginning to question MDB officials traveling on official passports that make them less open to scrutiny by American customs personnel, despite multiple entries into the United States each year. Recent allegations of some MDB staffers using these passports while engaging in activities ranging from child pornography to drug smuggling are raising questions about what else might be going on.

The MDBs respond by declaring their determination to crack down on any wrongdoing, going so far as to announce internal reform.

Meanwhile the Bretton Woods Project, a British public-interest group, has joined bipartisan American commissions, most recently in 1998 and 2000, in raising important questions about the legitimacy and effectiveness of the World Bank and the International Monetary Fund. They say these institutions suffer from "mission creep," their roles spreading far beyond either their mandates or competence. True accountability, the U.K. watchdog says, means giving more than lip service to fundamental reform by rebalancing governing boards, making their operations more transparent and selecting management based on merit principles.

Others add that all but the most junior MDB officials should be subject to financial disclosure and conflict-of-interest rules, and that much stronger information disclosure and whistle-blower protection policies are needed. "Political" appointments of bank representatives in countries where corruption tends to be the worst should stop, and MDB auditors' and evaluators' offices should be "delinked" from the banks' traditional career path. This last step, as one former senior IDB official told Insight, "makes it difficult for corruption to thrive because corruption and incompetence go hand in hand."

Unfortunately, in recent years the Treasury Department has been allowed to monopolize the U.S. executive-branch relationship with the MDBs, say critics, and its role frequently has been one of enabler for corruption and other misuses of power rather than oversight. In addition, they complain, the Treasury Department does not represent the full range of U.S. foreign-policy interests. Meanwhile, with a few notable exceptions, the U.S. Congress has been AWOL in providing responsible oversight of the development banks as the world's poor just keep getting poorer.

Martin Edwin Andersen is a reporter for Insight.