World Bank: Wolfowitz broke the rules.

“World Bank President Paul Wolfowitz broke bank rules in arranging a hefty compensation package for his girlfriend, a situation that has caused a ‘crisis in the leadership’ at the institution, according to a report released Monday by a special bank panel.” In response, U.S. Treasury Secretary Henry Paulson “lobbied finance ministers today on the bank chief’s behalf and argued that his mistakes aren’t a firing offense. Paulson blamed the furor on a communications breakdown.”

UPDATE: You can read the full report HERE. Some highlights are HERE.

UPDATE II: Wolfowitz gets Cheney’s endorsement: “Paul Wolfowitz should remain chief of the World Bank, Vice President Dick Cheney said Monday as the poverty-fighting institution moved closer to deciding Wolfowitz’s fate. … Asked whether Wolfowitz should stay in his job, Cheney, in an interview with Fox News in Aqaba, Jordan, replied ‘I do.’