Why the G20 Financial Summit Was So Disappointing
Bad timing and a recalcitrant Bush administration made for an underwhelming economic summit Nov. 15 when leaders of Group of 20 countries met in Washington to deal with the financial crisis.
The leaders came up with a list of 20 broad principles to increase international monitoring and regulation of financial markets and off-the-books securities transactions. Yet details won't be known until April when the 20 countries will meet again. The G-20 approved vague outlines that would establish "supervisory colleges" to improve global oversight of financial institutions, a Financial Stability Forum to extend a discussion of financial problems to emerging countries and greater involvement in the International Monetary Fund and World Bank. But the summit fell far short of some expectations. French President Nicholas Sarkozy, for instance, has been pushing for a global regulatory cop. Ideas of how to stem the subprime scandals among U.S. financial institutions didn't get very far.
One big problem was timing. Creating a real global regulator is anathema to the outgoing Bush Administration which agreed to the summit only reluctantly. Incoming president-elect Barack Obama won't take office for more than two months even though the dramatic effects of the global crisis are being played out daily. Obama did not attend Saturday's confab. Some areas of agreement included:
- Global accounting bodies such as the Financial Accounting Standards Board (FASB) should work towards a single, global accounting standard such as the International Financial Reporting Standard (IFRS).
- Regulators need to deal with off-the-books instruments such as credit default swaps.
- Credit rating agencies need better oversight.
- All G-20 members need to assess their own reporting and regulatory institutions.
- Resources from the IMF and World Bank should be marshaled when appropriate.
- Overregulation should be avoided.