Saturday, October 25, 2008

World Order?

Washington Post | 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.

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.

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.'"

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.