Paul Wolfowitch (Reuters)Trying to put a controversy behind it, the Bush administration was wasting no time finding a successor to World Bank President Paul Wolfowitz, who will resign over his handling of a pay package for his girlfriend.

Wolfowitz on Thursday announced that he would step down at the end of June, his leadership undermined by a furor over the compensation he arranged in 2005 for Shaha Riza, a bank employee.

His departure ends a two-year run at the development bank that was marked by controversy from the start, given his previous role as a major architect of the Iraq war when he served as the No. 2 official at the Pentagon.

It also ends a potential political headache for President Bush, who had named Wolfowitz to the post.

The Wolfowitz flap had been seen as a growing liability that threatened to tarnish the poverty-fighting institution's reputation and hobble its ability to persuade countries around the world to contribute billions of dollars to provide financial assistance to poor nations.

The bank "needs to rebuild it credibility immediately, regain its focus and devote its full attention to its clients," said the bank's staff association, which, along with former bank officials, aid groups and some Democratic politicians, had wanted Wolfowitz to resign.

The White House said it would move quickly to name a new candidate to run the bank.

Bush "will have a candidate to announce soon, allowing for an orderly transition that will have the World Bank refocused on its mission," White House spokesman Tony Fratto said.

Bush's selection must be approved by the World Bank's board.

Among those mentioned as a possible replacement for Wolfowitz were former Deputy Secretary of State Robert Zoellick, who was Bush's former trade chief; Robert Kimmitt, the No. 2 at the Treasury Department; Treasury Secretary Henry Paulson; former Rep. Jim Leach, R-Iowa; Sen. Richard Lugar, R-Ind., and Stanley Fischer, who once worked at the International Monetary Fund and is now with the Bank of Israel.

A White House official wouldn't comment on possible candidates, saying "any reporting on potential names is pure speculation."

The 185-nation bank, created in 1945 to rebuild Europe after World War II, provides more than $20 billion a year for projects such as building dams and roads, bolstering education and fighting disease. The bank's centerpiece program offers interest-free loans to the poorest countries.

By tradition, the bank has been run by an American. The Bush administration keenly wanted to keep that decades-old practice intact as it dealt with the Wolfowitz situation. The United States is the bank's largest shareholder and its biggest financial contributor.

Paulson, who will work with the president on finding a successor to Wolfowitz, said, "I will consult my colleagues around the world as we search for a leader." That suggested a more consultive approach to finding a new head of the bank.

Bush's selection of Wolfowitz in 2005 for the bank post had stunned Europeans and some other countries. Europeans were upset that Bush would tap someone so closely associated with the Iraq war. After the pay controversy erupted a month ago, Europeans led the charge for Wolfowitz to resign.

Wolfowitz waged a vigorous battle to save his job and maintained he had acted in good faith. He was all but forced out, however, by the finding of a special bank panel that he violated conflict-of-interest rules in his handling of Riza's pay package.

Until near the end, the Bush administration had professed support for Wolfowitz. But in a shift on Tuesday, the White House indicated for the first time it was open to his departure. It was the same day Wolfowitz made a last-ditch plea to save his job before the board.

After days of negotiations, Wolfowitz got what he wanted — an acknowledgment from the bank's board that he did not bear sole responsibility for the conflict-of-interest furor surrounding his handling of the pay package.

"He assured us that he acted ethically and in good faith in what he believed were the best interests of the institution, and we accept that," the board said in its announcement of Wolfowitz's resignation.

The bank board said it was clear that a number of people had erred in reviewing Riza's pay package. The board's statement made no mention of any financial arrangements related to Wolfowitz's departure, nor did it speak to Riza's future.

For his part, Wolfowitz said he was pleased that the board "accepted my assurance that I acted ethically and in good faith in what I believed were the best interests of the institution, including protecting the rights of a valued staff member."

Now, he said, it was in the best interest of the board that its mission "be carried forward under new leadership."


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