12 November 2008
Washington Prepares for Global Economic Summit
World leaders seek agreement on reforming financial systems
Washington — Leaders of the Group of 20 countries will dine at the White House and meet at Washington’s National Building Museum November 14–15 to discuss reforms of the global financial system.
All of the “Group of 20” heads of state are expected. The G20 was established in 1999, during the last financial crisis with worldwide effects, and includes developed and emerging market economies, whose finance ministers and central bank governors already regularly meet. Members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States, plus the European Union.
Also attending the summit will be representatives of the European Commission, the International Monetary Fund, the World Bank, the United Nations and the Financial Stability Forum.
Discussion will begin with the causes of the current global financial crisis and move to actions already taken and broader reform principles that might prevent a recurrence.
The Bush administration has said the agenda will include increased transparency, improved risk management, coordination among regulators, and adoption of more consistent rules in some areas, such as accounting and capitalization.
President Bush will also remind other countries’ leaders that the situation is no excuse to walk away from commitments on humanitarian and development assistance.
A CLASH OF WESTERN ALLIES?
U.K. Prime Minister Gordon Brown has spoken of the need for a new Bretton Woods system, referring to the World War II–era agreement that established the International Monetary Fund and World Bank. The effectiveness of these international institutions will be discussed — how they might be improved, their coordination with national regulators, and their role in preventing future problems.
But, while White House press secretary Dana Perino said the administration recognizes “there need to be some changes, especially when it comes to the interlocking nature of the economy,” the administration will frown on any proposal to scrap international institutions.
French President Nicolas Sarkozy has called for rewriting the rules of capitalism and suggested that financial regulations should apply across country borders. The Bush administration does not favor a single global regulator for financial institutions. Rather, the White House says, countries should improve their own rules in ways appropriate to their own national circumstances.
While some pundits emphasize a coming clash between European countries and the United States, there will be many other voices at the table, including those of emerging market countries that have accomplished much as the result of free-market capitalism, press secretary Perino said. And she emphasized that, despite media reports drawing distinctions, “even hostilities,” between U.S. and French positions, the countries cooperate.
“There is going to be nationalism rearing its head,” said Scott Talbott of the Financial Services Roundtable, which represents U.S. and foreign banks. “Each country will say: ‘We are the best. We didn’t have these failures. Follow us.’” But, in the end, he expects the summit to produce agreement.
His members — which include Allianz, a German insurer; Aegon, a Netherlands insurer; Barclays, a British bank; Japanese-owned Union Bank of California; and U.S. banks Citigroup and JPMorgan Chase — are isolated from each other “in silos,” Talbott said. He thinks the summit could help the industry get more communication and more “effective regulation.”
NEXT STEPS
This will be the first of several agreed-upon summits and, assuming leaders agree on principles — such as transparency of complex financial instruments — they will go back home to consult with economic experts before moving forward.
President Bush has indicated that the group should reconvene in a short period of time. The date of a next summit and the possibility of including more countries will be discussed.
President-elect Obama, while declining to participate in this first meeting, announced November 12 that former Secretary of State Madeleine Albright and former Republican Congressman Jim Leach will be available to meet with G20 delegations on the behalf of the Obama-Biden team. Albright served as secretary of state and as ambassador to the United Nations under the Clinton administration. Leach was a congressman for 30 years, serving on the House Foreign Affairs Committee and chairing the Banking and Financial Services Committee. In a statement released by the president-elect’s transition office, Obama commended President Bush for calling the summit and explained his intention to miss the summit thus: “There is one president at a time in the United States.”
Obama likely will be in attendance at any subsequent financial summit meetings, by virtue of the fact that he will be sworn in as president of the United States on January 20, 2009. A member of the National Security Council “will be in close consultation with the president-elect’s transition team and his international economic people ... over the next couple weeks,” Perino said.
“Obama is doing what most would see to be the appropriate thing by keeping away,” said Karen Hult, author of several books on the presidency and a transition adviser to the White House. She said the benefit to Obama is that the leaders can get the conversation started and he will be buffered from any not-so-desirable results.
