G-7 Endorses Proposals Intended to Ease Crisis

Top economic officials from the world's major industrial countries yesterday embraced a set of proposals aimed at increasing the transparency of banks and other financial institutions in hopes of calming tumultuous global markets.

The Group of Seven finance ministers and central bankers stopped short of any coordinated intervention in markets, a move advocated by the International Monetary Fund and others but resisted by G-7 officials as unwise because of the different ways the unfolding global financial crisis has affected economies around the world.

Meeting yesterday, the finance officials spent the largest share of their time talking about the financial crisis before endorsing a series of recommendations made by the Financial Stability Forum, an international group of bank regulators and other financial experts. The recommendations are aimed at restoring market stability by improving risk management, accounting practices, institutional transparency and cooperation between regulators across national borders.

Some critics said that while those measures will help prevent future problems, they will do little to resolve the current crisis, a contention disputed by G-7 officials.

"Rapid implementation of the FSF report will not only enhance the resilience of the global financial system for the longer term but should help to support confidence and improve the functioning of the market," the G-7 officials said in a statement.

The semiannual meeting of finance ministers from seven of the world's largest industrial economies -- the United States, Canada, Britain, Italy, Germany, Japan and France -- was held as the fallout from the U.S. subprime mortgage meltdown wrought economic havoc. Federal Reserve Chairman Ben S. Bernanke has called the financial distress triggered by the subprime debacle "among the most severe episodes of the postwar era." Treasury Secretary Henry M. Paulson Jr., meanwhile, has said that the U.S. economy has "turned down sharply."

Speaking to reporters after yesterday's meeting, Paulson reiterated his view that long-term prospects for the U.S. economy are good, and that the downturn in housing prices is a painful but necessary consequence of the "unsustainable" price bubble that preceded it.

"Markets are pricing and reassessing risk, and there are always difficulties during periods such as this," he said. "There may be more bumps in the road."

In the meantime, the damage is spreading far beyond the United States. The IMF has projected that the world economy, which has gone through a prolonged expansion, will slow sharply this year. It has urged governments and central banks to take stronger action to alleviate the crisis. But its ability to do so itself may be hampered by its own financial problems and, as its board meets this weekend, it will be grappling with ways to balance its budget.

The task faced by G-7 officials is made more difficult by sharply increasing prices for many commodities, from corn and soybeans to oil and natural gas. Increasing food prices have triggered unrest in 33 countries -- a situation that the World Bank's governing board is tackling in meetings here today and tomorrow.

British finance chief Alistair Darling, speaking yesterday at the Brookings Institution, called on policymakers to respond swiftly to contain the situation, which he called "the biggest economic shock since the Great Depression."

"We must continue to do whatever is necessary to maintain confidence in the financial markets," he said.

Darling said finance officials must act jointly to foster a better understanding of the potential downside of complex financial instruments that he said had done a good job of increasing the availability of credit around the world, but are now fueling the economic downturn because their risks are poorly understood even by the board members of financial institutions that hold them.

After their meetings, the G-7 officials were scheduled to have dinner with top executives from 10 major financial institutions to further discuss the economic turmoil.

Some finance officials called the dinner with private-sector executives unusual in the context of the G-7 meetings and said it was an acknowledgement of the way credit markets have rapidly evolved and expanded across borders.

Among those attending last night's dinner meeting were chief executives from Wall Street giants including Citigroup, Barclays, BlackRock and Morgan Stanley.