Bush Reserved as E.U. Leaders Assert Power in Crisis

By Dan Eggen
Washington Post Staff Writer
Saturday, October 25, 2008

In France, President Nicolas Sarkozy has loudly proclaimed the need to increase regulation and oversight of financial markets, vowing on Thursday to "refound the global financial system" as part of "an intellectual and moral revolution."

In Britain, Prime Minister Gordon Brown -- who has set up an economic "war room" at 10 Downing Street -- moved ahead of the United States to inject cash into private banks and is leading calls for global accounting standards and stronger oversight of international banking.

President Bush, by comparison, has been more wary in his public remarks as the crisis on Wall Street has grown into a global panic. The departing U.S. president has agreed to hold a global economic summit in Washington on Nov. 15 but has stopped short of endorsing the kind of far-reaching international proposals put forward by Brown, Sarkozy and others.

Instead, Bush has emphasized caution and is urging leaders to view any financial reforms as a way to "preserve democratic capitalism" rather than restrain it. "In the midst of this crisis, I believe the world ought to send a clear signal that we remain committed to open markets by reducing barriers to trade across the globe," Bush said at an international development conference earlier this week.

The contrast underscores the clashes that could erupt as Bush and other leaders hammer out a global response to the collapse of lending markets. The differences are emerging as markets continue to slide on worsening news, including new data showing that Britain's economy has contracted for the first time in 16 years.

As U.S. stocks fell again yesterday, the White House said it will take time for the administration's $700 billion rescue plan to take hold and pointed to a slight increase in existing housing sales last month.

"The markets are digesting a lot of information, a lot of economic news that is coming in, as well as implementation of the policy tools that we have implemented here and that other nations around the world have started to implement as well," White House press secretary Dana Perino told reporters. "So it's taking a while for the markets to digest that."

The economic summit next month will be held at the National Building Museum in Washington and will include leaders of the Group of 20 major industrialized nations and emerging markets, including China and India. The White House said three top officials will lead U.S. preparations for the meeting: Dan Price, assistant to the president for international economic affairs; undersecretary of state Reuben Jeffery; and Treasury undersecretary David McCormick.

In an interview, Perino said Bush "wants to make sure that he has the benefit of everyone's thinking" before endorsing specific reforms.

"We need to proceed with caution and care but also with all due speed," she said. "The president is concerned about moving too far too fast, and wanting to avoid unintended consequences."

But many across the political spectrum also argue that Bush's reticence is partly a function of his lack of political clout, with low approval ratings and just three months left in office. His status contrasts with that of Sarkozy, who has designs on a broader European role, and Brown, who has used the crisis to revive himself politically.

"Brown and Sarkozy are not going away in January, and they're not being displaced in 11 days when the next president is elected," said presidential historian Robert Dallek. "I also think there's a certain realization or understanding that the more Bush speaks out, the less influence he has."

Charles Freeman, a former Bush administration trade official now at the Center for International and Strategic Studies, said that Brown and other foreign leaders also see the crisis as an opportunity to challenge the United States' role as the leader of world's financial system.

"Sarkozy and Brown and others are attacking a U.S.-led order," Freeman said. "They're saying, 'We have to revamp this thing, and the U.S. is the problem.' "

Foreign leaders are also looking to see who will win the U.S. election, experts said. Neither Sen. John McCain (R-Ariz.) nor Sen. Barack Obama (D-Ill.) has committed to participating directly before moving into the White House.

Some market participants give the administration credit for pushing through the bailout plan and for eyeing foreign proposals with caution. Warren West, head trader at Greentree Brokerage Services in Philadelphia, said it is unclear whether the aggressive action advocated by Brown, Sarkozy and other foreign leaders is better than Bush's response. "I'm not sure if the actions taken internationally are appropriate," West said. "We're moved so far toward socialism that it is hard to say that we should move more into socialism."

Barry Savitz, senior managing partner at Greenwich Prime Trading Group in New York, said it's too early to speculate on whether Bush should be doing more. The administration needs "to get banks freed up from loans and stop housing from going down," Savitz said. "Maybe the U.S. could have done something differently. I'm not sure what they could have done. This is a process that's going to take time."

In New York yesterday, the United Nations convened a meeting of its board of chief executives, including the heads of the International Monetary Fund and the World Bank, to coordinate a strategy for containing the crisis.

U.N. Secretary General Ban Ki-moon urged the IMF and major central banks to set up "substantial standby lines of credit" that can be used to shore up banks in the developing world. A team of economists advising Ban have said that between $500 billion and $1 trillion is required to stabilize these banks.

"We do not yet know whether our efforts to stabilize the financial system will succeed," Ban said. "Too often, in recent weeks, financial leaders have been criticized for being too slow to recognize problems, for doing too little too late. We must act now to prevent today's crisis from becoming worse tomorrow."

Staff writer Dion Haynes and research editor Alice Crites in Washington and staff writer Colum Lynch in New York contributed to this report.