A reformer, interrupted
Ms. Lagarde seemed to be on a path to the very top of French government, widely tipped as a potential next prime minister and apparently about to change the very nature of the French economy by embracing the Anglo-American capitalism her predecessors had attacked.
And then, months into her job, the global economy crashed. Her bold economic and workplace-law reforms never happened, in part because they proved far more difficult than she anticipated and in part because the recession and the international credit crisis eclipsed all else.
Ms. Lagarde recognized almost immediately that the state would have to become involved, in a large, ongoing way. Together with Gordon Brown in Britain and Timothy Geithner in Washington, she pushed for a co-ordinated international stimulus, and won. The irony was not lost on her.
"I am supposed to be the free-market reformer, but I'm forced to talk about government intervention," she said in a Globe and Mail interview last year.
But she had never fully believed in American-style unregulated markets, either: When trader Jérôme Kerviel lost $7-billion of the bank Société Générale's money in early 2008, nearly crashing it, Ms. Lagarde moved quickly to reinforce France's already tough regulations.
She told The Globe that her ideal world would be one in which markets are free but fairly heavily regulated. "Yeah, I'd like to see less state ownership, less direct involvement in the economy, less actual pushing and pulling of economic players. But less regulation? No, I don't think so. More efficient regulations and a stricter set of rules? Yes, for sure."
That philosophy, by French standards, makes her a liberal - which, here, is a political insult, meaning a free-market fanatic. But by U.S. norms, she's a radical state interventionist.
Personally, she considers this a major transformation: Declaring her candidacy for the IMF last week, she proclaimed, "I am a woman of liberal temperament, but my liberalism is tempered" - a message that appeals both to the IMF's wealthier donor nations, which prefer more open markets, and to those that depend on IMF loans to stay aloft.
But that does not address the key question of the day - and the reason why IMF members, including China, are willing to accept a European atop the organization: How do you go about ending the European financial crisis? They all know the rescue of the 16-member euro-zone economy is crucial to the salvation of the world financial system.
Where does she stand? Ms. Lagarde has backed the rescues of Greece and Ireland, and played an important role in bringing countries together to agree on this approach. But on the underlying causes and ultimate solution, she has been dangerously vague.
Her predecessor, Mr. Strauss-Kahn, understood the crisis as, at base, one of trade imbalances, with the poorer European nations becoming dependent on the exported goods - and the exported credit - of the wealthier ones, such as Germany and France.
To prevent debt from pooling up in the periphery of Europe again, he frequently suggested in off-the-record discussions, it would be necessary to integrate Europe's economies much more tightly, uniting their fiscal plans and some aspects of their national budgets in a continent-wide plan. He had been pushing Europe carefully in that direction.
Will Ms. Lagarde carry on that effort? And does she have the economic intuition and political clout to transform an entire continent, the largest economy in the world, into something that won't crash so easily again?
Some doubt it: Martin Wolf, the influential economics columnist with the Financial Times, has decided she is not the right candidate. "Her economics are limited. If she were to become head of the organization, she would have to rely on the advice of those around her."
Despite being one of the most public and open figures in international finance, on a practical level Ms. Lagarde is still largely unknown and untested.
Much of her legend is not quite real: She is not temperamentally or economically American; she is not wholly synchronized with the Sarkozy team. But is she able, through style and personality, to get away with anything?
In the next few weeks, we'll begin to see.