Leaders seek to prevent future economic crisis
Published 1:28 am Sunday, November 16, 2008
World leaders battling a historic economic crisis agreed Saturday to flag risky investing and regulatory weak spots in hopes of avoiding future financial meltdowns.
President George W. Bush and leaders from nearly two dozen countries endorsed broad goals to fend off any future calamities and to revive the global economy amid rising unemployment and shrinking savings.
“We must lay the foundation for reform to help ensure that a global crisis, such as this one, does not happen again,” the leaders said in lengthy statement after the emergency summit.
The plan endorses an early warning system for problems such as the speculation frenzy that fed the U.S. housing bubble. It calls for the creation of “supervisory colleges” of financial regulators from many nations to better detect risky investing and other potential problems.
It will be up to finance ministers to flesh out the details to put such changes in place by the end of March. Leaders plan to hold the next summit by April 30, when Barack Obama is president.
“There is more work to be done,” Bush said, adding that the summit “is not going to solve the world’s problems.” Still, he believes the road map laid out was a good one.
Leaders backed efforts to improve international monitoring of markets and bolstering rules about how companies value their assets, a weakness seen as partly responsible for the crisis at hand. Those steps are aimed at making the global financial system more accountable to investors and more transparent to regulators.
There can be “no more blind spots” in international markets, said German Chancellor Angela Merkel.
A thorny issue was whether all nations should pledge to enact government spending plans to stimulate their economies. The leaders supported the benefits of that approach, but stopped short of a commitment for all to act at the same time, as some Europeans had favored.
The leaders pledged to “use fiscal measures” to energize individual countries’ economies “as appropriate.” They recognized the importance of the Federal Reserve and other central banks to order interest rate reductions to help cushion the economic fallout.
They emphasized the importance of keeping free-trading flowing, especially crucial during periods of economic stress that tend to lead to protectionist measures.
“We have reached important conclusions today about trade, about financial stability and about the expansion of our economies,” British Prime Minister Gordon Brown said.
Under the glare of an intense political and public spotlight, presidents and prime ministers needed to be careful not to let the talks become a blame game, which could further roil the fragile markets.
French President Nicolas Sarkozy was heartened that leaders could come together on a plan for action despite diverse interests from individual nations.
While the plan would boost oversight of fragile financial markets, it fell short of the sweeping tough new set of regulations or ambitious regulatory overhauls that some Europeans initially wanted.
“These are difficult talks,” acknowledged Brown, who had taken a lead in pushing for a global coordination of country-by-country economic aid plans.
The Bush administration, however, had reacted coolly to a second U.S. stimulus plan and opposes a bailout of the teetering U.S. auto industry. Democrats are pushing for aid to Detroit automakers amid reports that the biggest one, General Motors Corp., could be forced into bankruptcy by the end of next month.
World Bank President Robert Zoellick said the summit was a productive start, but added: “What matters now are the follow-up actions … People are looking to leaders for a global, coordinated and fast response.”
Not far from the summit at the stately National Building Museum, a handful of protesters carried neon yellow signs that read: “Money for people’s needs, not bankers’ greed” and “Money for jobs, not for war and occupation.”
Elsewhere in the capital, hundreds turned out to demonstrate against the war, promote Tibetan independence or champion other causes. The summit did not attract the large wave of protesters as seen at some global gatherings in years past.
The more inclusive mix of countries — beyond the wealthiest nations — at the summit was welcomed. Brazil’s president, Luiz Inacio Lula da Silva, said, “Emerging economies have to be taken into consideration in today’s globalized world.”
India’s prime minister, Manmohan Singh, noted that “emerging market countries were not the cause of this crisis, but they are amongst its worst affected victims.”
Japan’s prime minister, Taro Aso, urged China and others to help increase the International Monetary Fund’s $250 billion bailout pool for struggling nations hit by the crisis. Japan on Friday said it was ready to put in as much as $100 billion.
The crisis broke out in the United States around August of last year. Mortgage investments soured with the housing market’s collapse and the fallout quickly spread to other countries. Banks and other financial companies suffered huge losses and foreclosures skyrocketed. The troubles crimped auto and student loans and locked up lending for many consumers and businesses worldwide.
Although Obama stayed away from the summit, he designated two representatives — former Secretary of State Madeleine Albright and former Republican Rep. Jim Leach of Iowa — to meet with leaders on the sidelines.
Besides the United States, the participants are: Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Spain and Turkey. Other than Spain, those countries — plus the European Union — make up the Group of 20 industrialized and developing economies, or G-20. The group accounts for roughly 90 percent of the global gross domestic product, which measures the value of goods and services produced worldwide.
On the Net:
White House: http://www.whitehouse.gov/infocus/financialmarkets/index.html