» This Story:Read +|Watch +|Talk +| Comments
Page 2 of 2   <      

Nations Craft Hard-Fought Pledge To Repair World Financial System

President Obama's first trip across the Atlantic has included visits to six countries. Obama, originally scheduled to return to Washington after two final days in Turkey, took a surprise detour to Baghdad to visit American troops serving in Iraq.

Network News

X Profile
View More Activity

Even Obama, while affirming his support for the economic marketplace, said that without proper oversight by government "it goes off the rail sometimes . . . that it can end up in a very bad place."

This Story
View All Items in This Story
View Only Top Items in This Story

The agreement, a nine-page "Leaders' Statement" on the global economic crisis, includes steps to regulate hedge funds, increase transparency for offshore tax havens and dramatically boost the cash available to hard-hit developing countries.

Leaders pledged to triple the amount of money available to the International Monetary Fund to $750 billion, in line with calls from the United States to build up a larger supply of cash to help the IMF bail out a growing number of struggling nations. Europeans had initially called for a smaller figure that would have doubled the funds.

The agreement, however, stopped short of calls for additional injections of government spending and tax cuts to help boost deflated global demand. Although the United States, Britain and Japan called for more stimulus spending, Germany and France remained firm that the $5 trillion already being committed by major nations over the next 18 months was enough.

Leaders agreed to craft tighter controls over hedge funds and establish more rigorous regulations to prevent the buildup of toxic assets that poisoned the U.S. financial system in and spread overseas. They also agreed to exert pressure on countries that are tax havens, where banks operate largely in secret.

The leaders of France and Germany in particular had sought to portray the summit as a chance to reconstruct the world's financial regulatory system, rather than focus on spending to boost growth. They declared the emphasis on regulation a victory.

"Honestly, we never thought we would we have such an agreement," said French President Nicolas Sarkozy. "Even our Anglo-Saxon friends are now convinced that we must have reasonable rules."

Senior U.S. officials who attended the closed-door talks Thursday said Sarkozy's insistence on publishing a list of tax-haven countries briefly held up the final agreement because of opposition from China's president, Hu Jintao, and other leaders.

The officials, who spoke on condition of anonymity, said a personal intervention by Obama -- speaking quietly in a corner first with Sarkozy, then with Hu and then with both of them together -- produced compromise language that both sides could accept.

An initial list of countries, published late Thursday by a separate organization that represents developed nations, directed the public's attention to Panama and Monaco among a list of close to three dozen countries.

The leaders agreed to set benchmarks for executive pay and make accounting standards more uniform across borders. Most would be drafted by a new Financial Stability Board, where central bankers, regulators and finance ministers from the more than 20 nations represented at the summit will eventually hash out the details.

Credit agencies -- whose top-notch ratings of instruments linked to bad U.S. subprime mortgages gave false indications of their relatively safety -- would be subjected to new oversight and regulations. But there was no call for a global regulator that could overrule decisions made by individual countries.

At the summit of the Group of 20 nations, an emergency forum bringing together leaders from the wealthy nations of Europe, the United States and Japan along with emerging giants such as China and India, the members committed to avoiding the kind of protectionism that sparked a global trade war during the Great Depression.

"We are anxious to do everything we can to resist protectionist tendencies," Brown said.

Speaking to reporters for almost an hour Thursday evening, Obama echoed his British colleague, saying protectionism "could deepen this crisis."

"History tells us that turning inward can help turn a downturn into a depression," Obama said.


<       2

» This Story:Read +|Watch +|Talk +| Comments
© 2009 The Washington Post Company

Network News

X My Profile
View More Activity