23 October 2008
Briefing by White House Official on Global Financial Situation
Briefs on Bush’s invitation to G-20 finance ministers for economic summit
(begin transcript)
FOREIGN PRESS CENTER BRIEFING WITH TONY FRATTO, WHITE HOUSE DEPUTY PRESS SECRETARY
TOPIC: “UPDATE ON THE GLOBAL FINANCIAL SITUATION”
THE WASHINGTON FOREIGN PRESS CENTER, 529 14TH STREET NW, SUITE 800, NATIONAL PRESS BUILDING, WASHINGTON, DC
WEDNESDAY, OCTOBER 22, 2008 10:45 A.M.
MODERATOR: Good morning and welcome to the Washington Foreign Press Center. Just a quick reminder, if you have cell phones with you, please put those on silent or vibrate. When we get to the Q&A section of this morning’s briefing, please wait for the microphone and then state your name and your news organization.
And now, I’d like to introduce this morning’s briefer. Tony Fratto, who is the White House Deputy Press Secretary, will speak with an update on the global financial situation. Now, I’ll turn it over to Tony. Thank you.
MR. FRATTO: I know all of you have the statement and should soon be getting the transcript from Dana Perino’s briefing this morning where she made the announcement. I just want to repeat some of that and highlight a few points of things that are particularly important to President Bush, and then prefer to spend most of the time on your questions.
So of course, we announced today the President sent out invites to the leaders from countries that are part of the G-20 finance ministers’ process. Of course, the G-20 does not have a heads of state component to it, but we thought that was the most appropriate grouping for countries for this summit and remind you that the G-20 was created in the aftermath of the financial crises of the late 1990s. This will be the first in a series of summits that bring together leaders from countries that participate in this process.
As the President explained in his comments over the weekend, it’s important that this first summit discuss the underlying causes of the financial crisis, that we review the progress that has been made by all of our countries in trying to respond to the current financial crisis, that we begin to develop the principles for reform needed to ensure that we don’t see a repetition of the crisis, and then that the leaders are able to charge working groups and experts groups to go out and to develop policies that fit under – within the umbrella of principles that the leaders will discuss. And some of those principles that are particularly important to us here in the United States, and that President Bush will be emphasizing, is the need to ensure that we continue the momentum towards freer markets and increase trade and trade liberalization and the increase in flows of capital across borders.
We want to make sure that we are doing it in ways that don’t create systemic events, of course, like what we’ve seen recently. But we do want to make sure that capital is being put to use to its most productive – in the most productive way possible to improve standards of living for people across the globe. And one of the things that President Bush will be reminding everyone, and I think you’ve seen this reflected in his recent speeches – the speech on Friday, his comments over the weekend, a speech that he made at the White House Development Conference yesterday – is that increased investment, increased foreign direct investment, including – and portfolio investment, the flows of capital to the most productive use, the increase in trade across borders, has in fact helped to improve the standards of living for hundreds of millions of people across the globe, and that’s something that we want to continue to see. It has helped to lift people out of poverty.
And so anything that we do through this series of summits, I think we want to ensure that we don’t inhibit that kind of market activity, that we continue to see investment, and that we continue to see increased trade. So that will be the focus from the President and the United States throughout this process. We’ll want to listen to the ideas of lots of countries. I know we’ve heard some ideas from certain individual countries. We haven’t heard from a number of others, at least in a public way yet. And the President is – wants to be as open as possible to the ideas of leaders from countries all across the world, from every region of the world, and every region of the world is – will be represented in this group.
I should also note – I think it’s in the statement – but the leaders of the Bretton Woods institutions will be attending as well: the president of the World Bank, the managing director of the IMF, as well as Mario Draghi, the chairman of the Financial Stability Forum. I think it’s critically important that we have the chairman of the Financial Stability Forum there. The FSF has done really remarkable work in recent years in developing the kinds of policies that we all are looking for to help to prevent the kinds of recent systemic events that we have seen. And this is a group that most – I know, certainly most Americans – have never heard of. And I’d say most people around the world have never heard of the work of the Financial Stability Forum. But we want to make sure that they have a seat at the table, and are offering those ideas.
So why don’t I just leave it there, and I’ll be happy to answer any questions you have. Yes, sir.
QUESTION: Mounzer Sleiman with Orient News Service. What was the criteria this time to select a country, and why there was no consideration to additional countries? We heard, at least, Spain indicated their desire to be included. And you said it’s representing the regions. Why, let’s say, Saudi Arabia is representing the Gulf states? Why there is no additional state or, let’s say, why Egypt is not there from the African –
MR. FRATTO: I think you can – I understand your point. I think you can make a case for lots of countries who would want to be participants in this process. In the leadup to this process, all of us, of course, would listen to those ideas. There was a great deal of discussion among the leaders about the size of the group and some – a lot of consultation went into that. And the leaders collectively believe that to go smaller than the G-20 group of countries would be too small, would not be inclusive enough of a number of emerging market and developing nations, so we wanted to ensure that those nations were represented in these discussions. So that was, I know, very important to the President. He emphasized that a number of times that we have both developed – the developed nations, the major developed economies, as well as the developing and emerging market economies. There are a numbers of countries in Europe, I know, who would like to be at the table. I should note that the European Commission will be at the table representing Europe, in addition to a number of other European countries who are already well represented in the G-20.
QUESTION: Can I just follow-up on one thing regarding President Sarkozy’s criticism of the American economic model or the financial system. Any comment on that?
MR. FRATTO: I don’t have any comment on President Sarkozy’s comments. I think what we will have is a very robust discussion about not any one particular model. I heard from a lot of corridors the idea of, you know, having to rewrite the rule book for international capital. And I’d just add, I’ve been an economist for almost 20 years and involved in policymaking for about 18 years, and I haven’t found that rule book yet that needs – that will be rewritten. I think there’s a lot of things going on out there without a rule book, and maybe that will be some of the discussions that the leaders will have.
QUESTION: Thanks. First, thanks for doing this. Thanks for coming. And the same – sort of same question from the other angle. You have done a lot of work, obviously, to arrange this in a very short period of time. Can you tell us how it was fleshed out with the leaders? And obviously – I come from Russia – I’m mostly interested in how you did this with the Russians, if possible. And if I may, the international organization leaders will be present, but the IMF chief is now embroiled in a scandal so if you could say a couple of words about that.
And lastly, the U.S. holds the privilege to appoint – basically to appoint a World Bank president. Is – are you willing to forego that privilege as part of the reform? Thanks.
MR. FRATTO: Well, going to your first question about our consultations with Russia. I don’t believe President Bush spoke to President Medvedev in this context, but I believe that others in the government have. The President did speak to a number of other leaders from the G-20 group.
Your second question was about –
QUESTION: (Off-mike.)
MR. FRATTO: I’m not sure who the individual was.
QUESTION: My second question is about –
MODERATOR: Could you wait for the microphone.
QUESTION: The second question is the IMF and the World Bank – the selection of the president for the World Bank, the American, and the scandal at the IMF.
MR. FRATTO: Dominique Strauss-Kahn is the managing director of the IMF. He has a great deal of experience on these issues, and we welcome him at the table for these discussions and especially the incredible work that goes on at the IMF and the talent they have in dealing with financial crises over the recent decades. That equity knowledge that will be brought to the table, I think, is very important and will be – will certainly inform the discussions and decisions made by the leaders.
We take the privilege of nominating a candidate to lead the World Bank. We do that in consultation with other shareholders of the World Bank, as we do with the IMF. And that is done in consultation with other members, and I don’t expect that to change.
Yes.
QUESTION: Oh, thank you. I’m from China Central Television. As you probably know, Asia-Europe leader summit is going to be held in Beijing in a couple days.
MR. FRATTO: Yes.
QUESTION: And this year, a record number of Europe and Asia heads of states are committed. And I – and of course, the top priority is to address the global financial crisis. So what kind of actions does U.S. Government expect from Asian-European countries to help ease these global financial woes first started in the U.S., and also to establish a sustainable global financial order?
MR. FRATTO: Well, I think it’s incredibly important that leaders from Europe are going to China for these meetings. It is very important. There are three very large engines of growth in the world, and one is here in North America, and then Europe, and then Asia. And from time to time, we rely on each other to generate growth. And certainly, the global economy for a number of years has relied on growth from Asia to support growth in other parts of the world and that’s very good.
Certainly, there were weaknesses in the U.S. financial system and we’ve tried to respond to them. Other parts of the world are trying to respond to them also, and I think that’s the purpose of this discussion. We hope that the discussions in Asia in the coming – at the end of this week, I believe, right – that they’ll have a chance to raise ideas and consider some of the options that have been presented publicly by certain leaders in the world and people will come to – leaders will come to the summit here in the Washington area in a good, informed way and ready to have a good discussion.
QUESTION: Thank you. Yasmeen Alamiri from the Saudi Press Agency. You mentioned that you had spoken to some of the leaders ahead of this. And who have you spoken to, if you can address that? And also –
MR. FRATTO: You know what, I don’t have a list here in front of me. I’m sorry. I know that the – at various levels of government at the State Department and Treasury, there have been extensive discussions with lots of countries. And I know the President, so far, has been able to speak to around a dozen leaders.
QUESTION: Okay. And also – I’m sorry, if you could actually just address if there’s – I don’t know if you can anticipate what the role of the Saudis in representation of the other Arab states would be and if maybe they would be addressed in a different way because the financial crisis has maybe affected them a little differently than has, say, Europe. And so I don’t know, especially coming after yesterday’s summit –
MR. FRATTO: Right.
QUESTION: – and I guess how they would be asked to deal with the developing countries and how they would skew their markets?
MR. FRATTO: Well, you know, the Saudis come from a – they frequently – the Saudis frequently speak for the Gulf region in a lot of ways, and it will be very important to have them at the table. And also, we can’t forget the role of energy in any of our economic discussions and the great level of expertise on the part of the Saudi leadership on that topic. But I’ll leave it for the Saudis to explain what they hope to bring to the table. But I would expect it has a lot to do with the flows of finance as well as holders of large amounts of dollars and seeking ways to invest it in the world. They have particular views on that.
QUESTION: Can I follow on that?
MR. FRATTO: You can follow and then we’ll go –
QUESTION: Yeah, sorry. Just – because I know I’ve spoken with Dana on this as well. I’ve asked her this. And I’m not – because I know there’s a lot of – I’ve always heard about the focus – the U.S. talks with Europe and what we’re expecting from Europe. But there must be certain standards or something that you expect when going into this. I mean, they’ve been invited. So obviously, we have certain expectations in the dialogue that we’d like to get –
MR. FRATTO: Right. Well, certainly, the Saudis have been invited. They are members of the G-20. They’re part of the G-20 finance ministers and central bank governors process. So – and that was the group that we chose to invite them from.
But I think there are lots of virtues to having the Saudi leadership there. They are, you know, one of the unique large oil producers and holders of lots of foreign currency. And so they have views and interests and have dealt with cross-border problems for many, many, years. Obviously, their sovereign wealth funds are of interest to lots of people, and I’m sure they’ll want to represent the interests of their holders of investment capital also.
QUESTION: Christiano del Riccio, Italian News Agency, ANSA. The 15 of November – of course, America will have also a president-elect. Can you detail us – elaborate a bit about the kind of input that Mr. Obama or Mr. McCain will be able to give to the summit?
MR. FRATTO: Yeah. Obviously this is happening in an interesting environment in the midst of a presidential election. The President is – feels very strongly that we should seek the views and input of whoever the president-elect is. It’s very important to him, because we are talking about a process that will straddle the two administrations.
But it will be up to the president-elect, whoever that is, as to how they would like to do that and how much. I mean, we certainly don’t want to be presumptuous as to what their role should be. Of course, we – you know, we only have one president at a time in this country, but we recognize that we’re dealing with a process that will extend over months. And so we would certainly seek and welcome the input of the president-elect.
Yes.
QUESTION: Yeah, this – I’m Yu Qianliang with Xinhua News Agency of China. This summit is going to be held in Washington, D.C. area, but I know that many countries, including many European countries and the United Nations, strongly suggested – it is the summit held in New York, where the crisis started. So what’s your comment on this country’s idea? And the second question is that many emerging markets leaders will come to this summit, including Chinese leader. So what do you think of this emerging markets law in dealing with the crisis, including Chinese?
MR. FRATTO: Well, I think it’s – I think – first, I think it’s an oversimplification to say that the crisis started in New York. I think we’ve – I would say that the crisis started at the home mortgage loan origination point in millions of offices across the country. So that’s where the crisis started; not in New York.
The easiest and best place to put together a summit quickly is clearly here in the Washington area where everyone has full embassy staffs and it’s less expensive and easier for us to get the right space and everything else that we need to put on a summit. Usually, a summit is on the calendar for, you know, years in advance and it’s easy to prepare, and we’re trying to do it in three weeks. And that’s a heavy lift, especially that all of our friends over at the State Department will be working like the Energizer bunnies trying to help put this all together with lots of, you know, delegations coming into the country in a short period of time. So it’s a lot easier for us to host it here.
Yes, ma’am.
QUESTION: Heba Khoudy from Awan Kuwaiti newspaper. You mentioned that the Islamic stability forum will be – will participate in the summit. The Islamic stability forum –
MR. FRATTO: I don’t think I said the Islamic stability forum; the Financial Stability Forum.
QUESTION: Financial Stability. But you mentioned that you’re going to have some Islamic – you are going to focus on the Islamic financial system.
MR. FRATTO: Not as a particular focus, although if that was something that certain countries wanted to raise, the Islamic finance and those issues, they’re certainly welcome to.
QUESTION: That’s according – according to the participants, if they want to focus on it or not?
MR. FRATTO: We are open to the ideas of all the participating countries, and if non-invited countries have ideas that they would like to be raised at the summit, we would certainly be open to listening to those ideas as well.
QUESTION: Does that mean that you are willing to adopt some Islamic measures to avoid or to have some solution to the crisis?
MR. FRATTO: I don’t think I would want to preclude the discussions of the leaders.
QUESTION: Thank you.
MR. FRATTO: Yes, sir.
QUESTION: Yes, thank you. Ron Baygents with Kuwait News Agency. Following up on the gentleman from ANSA on the president-elect’s input, specifically, will the president-elect or his designee be invited to this summit?
MR. FRATTO: It’s just too early to say. I mean, we’ll have conversations with the campaigns, and as I said, I don’t think the – I believe neither the campaigns nor we in the White House want to be presumptuous about their participation level.
QUESTION: Okay. And then following up, you said first in a series of summits.
MR. FRATTO: Mm-hmm.
QUESTION: And my question there is, with only three months to go in the Bush administration, what series of summits are you envisioning? Are you talking about G-20 only? Are you talking about what timetable that you –
MR. FRATTO: Yeah, I think that will – that will be something for the leaders to decide. They’ll talk about process going forward. Certainly, all the leaders who President Bush spoke to understand that these are incredibly complicated issues; they require a lot of work and a lot of rigorous analysis of many of the ideas that are talked about out there.
We’re starting off with a conversation about principles. This won’t be a case of, you know, the leaders sitting down at a meeting here and, you know, renegotiating Basel II, for example, you know, banking regulations. This is – it’s not going to get to that level of detail. They’re going to focus more on principles here, so there will be a lot of follow-on work that needs to get done. The – a proposal for discussion is that those would be – those would involve follow-on leaders’ summits. They will – could also involve follow-on meetings of finance ministers and other lead economic officials. The countries will name groups of teams that are drawn from the offices of the heads of state and finance ministries and probably foreign ministries as well, and be able to work going forward on fleshing out the policies that adhere to the principles that the leaders discuss.
MR. FRATTO: Just working my way back. Right there, yes, sir. I’ll come to you next.
QUESTION: Brian Beary from Europolitics. Just on the agenda, on the European side, I think it was Gordon Brown is saying that the Doha round should come up again. And President Sarkozy keeps talking about tax havens. Are these two issues President Bush wants to talk about?
MR. FRATTO: You know what? I’m not going to rule, you know, individual agenda proposals in or out right now, although it’s no secret that we certainly want to talk about trade. Whether it’s, you know, Doha-round specific, we’ll let – we’ll let you know more as we get closer to the discussion. But clearly, trade is an integral part of our international economic transactions. It’s not just on the finance side. It’s trade side. And so – and that’s a very, very high priority for the President.
So you can expect that trade will be discussed, but as for other specific ideas, like I said earlier, we have heard from some countries in a public way what their ideas are. We haven’t heard from a lot of other countries who we know have ideas and would like them to be considered as possible agenda items. And we’ll – we’d like to stay open about that.
Yes, sir.
QUESTION: Yeah, thank you. I’m Hiroshi Nishimura. You mentioned – continue the capital flow cross-border.
MR. FRATTO: Right.
QUESTION: And my question is, coming to the summit, their agenda of control over the hedge fund or a tax haven.
MR. FRATTO: I know there’s lots of interest in hedge funds and tax havens, I mean, just as – just empirically looking at the recent crisis, I don’t think – I haven’t heard anyone point to those two issues as causal to the recent financial crisis. But of course, anyone is free to raise any topic in this area that they would like to have on the table for consideration of discussion.
Yes.
QUESTION: My name is Watanabe from Japanese newspaper Sankei Shimbun. Some criticize that deregulation on financial sectors during this administration caused, finally – current financial crisis. For example, a (inaudible) removed net capital rule in 2004 and that caused extremely higher leverage. Do you think – is there any misjudgment or mistake by regulator – U.S. regulator and –
MR. FRATTO: I think there are – I think lots of people have lots of ideas for what did cause or contribute to the financial crisis, and I think that’s exactly what the leaders will be discussing, and I think they’ll have a robust discussion on that.
Let’s go to you in the middle.
QUESTION: Yeah, Macarena Vidal from EFE, Spanish news agency. Going back to the guest list, Spain had a – insisted that they wanted to be invited and President Sarkozy has said that he thought that Spain should be in the – in this meeting. What were the criteria specifically to exclude Spain?
MR. FRATTO: Yeah, there was no decision to exclude Spain. I think what the – all the leaders had determined was that we have this existing G-20 finance ministers grouping that has done a lot of work in this area, and that was the best way to draw the line for participation. I think I can probably think of at least half a dozen to a dozen other countries who can make a strong case for wanting to participate in the actual leaders’ discussions. But you can get too big that you can’t – that you can’t come to consensus on how to move forward as well, too. And so that’s the way the leaders’ discussions went, and they felt that it was best to stick with the G-20 finance ministers’ process.
But as I said, we’re also willing to listen, and we encourage all countries to bring forth the ideas that they have and the concerns that they have to the table. And whether Spain would prefer to do it on its own with any of the leaders that will be participating or through their representation at the summit through the European Commission, they’re certainly welcome to do that as well.
In the back of the room.
QUESTION: Hi, Kaoru Nishizaki from Asahi Shimbun. Just one small point about G-20, okay? When was the date that they meet next time in Brazil? Is it –
MR. FRATTO: I believe finance ministers –
QUESTION: Yeah.
MR. FRATTO: – are meeting later in – maybe a week later in November. I can’t remember the exact date either, but they meet in November in Brazil.
QUESTION: Right, early November, right. Yeah –
MR. FRATTO: Is it early November or later?
QUESTION: I think so. I think so, yeah.
MR. FRATTO: Okay.
QUESTION: Another point is that earlier on, the G-8 leaders issued a statement about the (inaudible). And they mentioned about the IMF and its – its – you know, capability in containing –
MR. FRATTO: Mm-hmm.
QUESTION: What will be the role of IMF, do you think, in – for – you know, ongoing process?
MR. FRATTO: Well, I think the IMF would play their traditional role with any countries who may be experiencing, you know, balance of payments crises and problems in their economies, the role that the IMF has played for many, many years in trying to help countries get through those difficult periods. We’ve seen some of that already with the IMF programs, some countries feeling the impact of the financial crises and maybe commodity price changes that have affected their domestic economies, and capital flight. And so the IMF has a great deal of experience – unfortunately, they have a great deal of experience in dealing with financial crises. But – and also unfortunate – but good to know that that experience is there. I have a feeling it’s going to be put to use with a number of countries in the coming year.
Yes, sir.
QUESTION: Ilin Stanev, Bulgarian newspaper Capital. You said you have heard a lot of ideas from other countries for possible actions. Can we expect that United States will declare some ideas for this summit?
And you said that the summit wants to ensure that international trade liberalization is still going on.
MR. FRATTO: Mm-hmm.
QUESTION: Do you think that this is a real threat for the international trade and liberalization?
MR. FRATTO: We think not just here in the United States but in a number of countries around the world, when you experience this kind of shock, a frequent reaction is to turn inward and to think among some people that the best way to deal with the problem is to become protectionist. We saw some of this kind of reaction, by the way, recently with the food price shocks, where a number of countries made decisions, essentially, to horde food that only further deepened the food price problem around the world.
So we want to make sure that countries are making sound decisions, that everyone understands the long-lasting impacts of the decisions that they make. And certainly in the area of trade, we are very, very concerned, as I said, not just here in the United States but in a number of countries around the world, about protectionist tendencies.
QUESTION: (Off-mike.)
MR. FRATTO: And, yeah, absolutely, you can expect to hear from the United States on – from President Bush. At some point before the summit, we’ll have a chance to talk more about that.
Yes.
QUESTION: Taikashi Kaizu, Jiji Press. Japan has now rotating chairmanship of G-8, and do you think Japan has particular role as chairman of G-8 in G-20 summit this time?
MR. FRATTO: Japan has always been a leader in these kinds of discussions, and I certainly expect that from Prime Minister Aso. I think a great deal of experience of dealing with things like financial crises, certainly within Japan over the past couple of decades, and in Asia more broadly, Japan’s view of how that crisis in the late 1990s was dealt with. Japan is the second largest national economy in the world and a very important player in international trade and finance. It’s one of the most highly traded currencies in the world, and a number of firms that are competitive in all markets across the world. So I think Japan will play its traditional very important role and be a very strong voice for the kinds of principles that I believe need to be discussed at this summit.
QUESTION: Doo Hyung Hwang, Yonhap News Agency, South Korea. Do you think any commitment to be made by the Bush Administration will be supported by the next administration? Also, some say the ongoing financial crisis should mean the end to the Bretton Woods regime, which is based on the IMF, and some say that not should be – not should be reformed, should be replaced by something else.
MR. FRATTO: I can’t speak for the next administration. I know there are two people campaigning out there right now to be able to speak for the next administration, and we’ll let them do that.
But with respect to the – you know, the Bretton Woods system, I think sometimes there’s some misconception out there about what the Bretton Woods system is. We have certain Bretton Woods institutions that grew out of that conference in 1944. We had a system that came out of that conference that broke down nearly four decades ago, and so it’s hard for anyone to talk today about a present Bretton Woods system. It just simply doesn't exist as it did coming out of the Bretton Woods conference at that time. And that’s why when I say, you know, people talk about the – you know, rewriting the rulebook, there really isn’t that kind of rulebook. We have lots of rules out there, lots of systems, lots of ideas for how the international economy should operate. A lot of things have grown up since then, like the WTO that has become much more important in the lives of countries and their cross-border trading relationships than ever before.
And so I think it’s a very different time today, and I know that individual countries have different feelings about the IMF and how it should operate. And I could tell you that we – every institution has room for improvement, but we believe the IMF has done an excellent job in trying to promote the kinds of policies that lead to economic growth and that encourage trade and investment between countries, which we – as I said, we believe is the best way to improve standards of living for people across the globe.
Thank you.
MODERATOR: Thank you, Tony. And thank you, everyone, for coming.
(end transcript)
