Gold9472
11-16-2008, 08:29 PM
Humbled US agrees to share world's financial top billing
http://business.theage.com.au/business/humbled-us-agrees-to-share-worlds-financial-top-billing-20081116-6861.html
11/16/2008
THE world's international financial institutions will be reshaped and worldwide regulatory and accounting rules reformed as a result of the G20 meeting.
The global leaders' 11-page statement spoke of broad principles, leaving the details to be worked out by aides before another summit meeting in April, after Barack Obama assumes the US presidency.
But the gathering in Washington of nations from every region reflected the new balance of power emerging in the aftermath of a financial crisis that has devastated even well-run economies, a wrenching process that British Prime Minister Gordon Brown has dubbed "the birth pangs of this new global order".
Under the plans outlined by the leaders, countries such as China, Brazil and India will gain greater roles and responsibilities in a restructuring of the international financial system, while European leaders won a commitment to new regulations and controls on banks, rating agencies and exotic financial securities.
The leaders also agreed that a dramatic failure of market checks in "some advanced countries" was among the root causes of the financial crisis, an implicit rebuke of the US.
"I'm a free market person," President Bush told reporters after the summit ended, "until you're told that if you don't take decisive measures then it's conceivable that our country could go into a depression greater than the Great Depression."
The Europeans got "virtually everything" they sought at the summit, French President Nicholas Sarkozy crowed. He said it had been difficult to persuade Mr Bush to hold the summit, but the results were worth it. "America is still the No. 1 power in the world," he said. "Is it the only one? No, it isn't."
The summit communique declared: "We are determined to enhance our co-operation and work together to restore global growth and achieve needed reforms in the world's financial systems."
The leaders agreed to set up a new regulatory body, "a college of supervisors", to examine the books of major financial institutions that operate across national borders, so regulators could begin to have a more complete picture of banks' operations. They demanded greater scrutiny of hedge funds and the completion of a clearing house system to help standardise and limit risk on some of the opaque financial derivatives that helped bring down Wall Street's investment banks.
Leaders also agreed to submit their countries' financial systems to regular, vigorous reviews by the International Monetary Fund — assessments that some countries, including the US, had long resisted. And they urged new constraints on pay schemes at financial companies that "reward excessive short-term returns or risk-taking".
Mr Sarkozy was especially pleased by the mention of executive compensation, although the communique noted that action could be voluntary or regulatory. "Have you ever seen in the Anglo-Saxon world even discussion to have rating agencies downgrade the banks where executive compensation has (encouraged) them to take too much risk? I have never seen it," he said.
Senator Obama stayed away from the summit, though the White House extensively briefed one of his senior advisers on the deliberations and two of his representatives met 17 leaders or their aides on the sidelines.
Many leaders frown on Senator Obama's calls to bail out the car industry as a form of protectionism and President Bush has pledged a one-year hiatus on protectionist measures.
President Sarkozy, diplomats said, was the slowest to commit to a moratorium on protectionist measures and a reaffirmation of free trade, flustering some of the developing world leaders whose nations have been badly hit by a drop-off in exports as the global economy slows. Sources said other leaders, including Canadian Prime Minister Stephen Harper, spoke out against Mr Sarkozy's calls for broad global regulation, arguing that even in progressive Canada, the idea would be seen as violating national sovereignty.
Senator Obama, in the Democratic Party's weekly radio address, commended President Bush on Saturday for holding the summit, and called for a new fiscal stimulus package, which President Bush has resisted. On that issue, the communique leaned towards Senator Obama's position, calling for "using fiscal measures to stimulate domestic demand to rapid effect, as appropriate".
World Bank president Robert Zoellick, who attended the summit, was betting on Senator Obama spending up. Dominique Strauss-Kahn, managing director of the IMF, who also attended, called for nations to approve a fiscal stimulus equal to 2% of GDP. Such a move, he said, would result in a 2% increase in growth. Asked where fiscal stimulus was needed, he said: "Everywhere, everywhere where it is possible."
The communique also said that, over time, the IMF and other global institutions "must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy".
Traditionally, global economic shocks are handled by the G7 — the United States, Britain, France, Germany, Japan, Canada and Italy — and Russia, known as the G8. The G20, which includes emerging economies, may now take precedence.
At the G20 meeting, Chinese President Hu Jintao called for "a new international financial order that is fair, just, inclusive and orderly", according to a translation of his remarks. President Hu, however, did not address demands that China use some of its $US2 trillion ($A3 trillion) in reserves to bolster the IMF.
The communique was blunt in identifying causes of the crisis as "weak underwriting standards, unsound risk-management practices, increasingly complex and opaque financial products and consequent excessive leverage (debt)".
http://business.theage.com.au/business/humbled-us-agrees-to-share-worlds-financial-top-billing-20081116-6861.html
11/16/2008
THE world's international financial institutions will be reshaped and worldwide regulatory and accounting rules reformed as a result of the G20 meeting.
The global leaders' 11-page statement spoke of broad principles, leaving the details to be worked out by aides before another summit meeting in April, after Barack Obama assumes the US presidency.
But the gathering in Washington of nations from every region reflected the new balance of power emerging in the aftermath of a financial crisis that has devastated even well-run economies, a wrenching process that British Prime Minister Gordon Brown has dubbed "the birth pangs of this new global order".
Under the plans outlined by the leaders, countries such as China, Brazil and India will gain greater roles and responsibilities in a restructuring of the international financial system, while European leaders won a commitment to new regulations and controls on banks, rating agencies and exotic financial securities.
The leaders also agreed that a dramatic failure of market checks in "some advanced countries" was among the root causes of the financial crisis, an implicit rebuke of the US.
"I'm a free market person," President Bush told reporters after the summit ended, "until you're told that if you don't take decisive measures then it's conceivable that our country could go into a depression greater than the Great Depression."
The Europeans got "virtually everything" they sought at the summit, French President Nicholas Sarkozy crowed. He said it had been difficult to persuade Mr Bush to hold the summit, but the results were worth it. "America is still the No. 1 power in the world," he said. "Is it the only one? No, it isn't."
The summit communique declared: "We are determined to enhance our co-operation and work together to restore global growth and achieve needed reforms in the world's financial systems."
The leaders agreed to set up a new regulatory body, "a college of supervisors", to examine the books of major financial institutions that operate across national borders, so regulators could begin to have a more complete picture of banks' operations. They demanded greater scrutiny of hedge funds and the completion of a clearing house system to help standardise and limit risk on some of the opaque financial derivatives that helped bring down Wall Street's investment banks.
Leaders also agreed to submit their countries' financial systems to regular, vigorous reviews by the International Monetary Fund — assessments that some countries, including the US, had long resisted. And they urged new constraints on pay schemes at financial companies that "reward excessive short-term returns or risk-taking".
Mr Sarkozy was especially pleased by the mention of executive compensation, although the communique noted that action could be voluntary or regulatory. "Have you ever seen in the Anglo-Saxon world even discussion to have rating agencies downgrade the banks where executive compensation has (encouraged) them to take too much risk? I have never seen it," he said.
Senator Obama stayed away from the summit, though the White House extensively briefed one of his senior advisers on the deliberations and two of his representatives met 17 leaders or their aides on the sidelines.
Many leaders frown on Senator Obama's calls to bail out the car industry as a form of protectionism and President Bush has pledged a one-year hiatus on protectionist measures.
President Sarkozy, diplomats said, was the slowest to commit to a moratorium on protectionist measures and a reaffirmation of free trade, flustering some of the developing world leaders whose nations have been badly hit by a drop-off in exports as the global economy slows. Sources said other leaders, including Canadian Prime Minister Stephen Harper, spoke out against Mr Sarkozy's calls for broad global regulation, arguing that even in progressive Canada, the idea would be seen as violating national sovereignty.
Senator Obama, in the Democratic Party's weekly radio address, commended President Bush on Saturday for holding the summit, and called for a new fiscal stimulus package, which President Bush has resisted. On that issue, the communique leaned towards Senator Obama's position, calling for "using fiscal measures to stimulate domestic demand to rapid effect, as appropriate".
World Bank president Robert Zoellick, who attended the summit, was betting on Senator Obama spending up. Dominique Strauss-Kahn, managing director of the IMF, who also attended, called for nations to approve a fiscal stimulus equal to 2% of GDP. Such a move, he said, would result in a 2% increase in growth. Asked where fiscal stimulus was needed, he said: "Everywhere, everywhere where it is possible."
The communique also said that, over time, the IMF and other global institutions "must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy".
Traditionally, global economic shocks are handled by the G7 — the United States, Britain, France, Germany, Japan, Canada and Italy — and Russia, known as the G8. The G20, which includes emerging economies, may now take precedence.
At the G20 meeting, Chinese President Hu Jintao called for "a new international financial order that is fair, just, inclusive and orderly", according to a translation of his remarks. President Hu, however, did not address demands that China use some of its $US2 trillion ($A3 trillion) in reserves to bolster the IMF.
The communique was blunt in identifying causes of the crisis as "weak underwriting standards, unsound risk-management practices, increasingly complex and opaque financial products and consequent excessive leverage (debt)".