G7 Endorses Plan To Avert Financial Crises

Plan Seeks To Prevent U.S. Credit And Mortgage Debacles That Sent Tremors Worldwide

(AP)  Finance officials from the world's top economic powers endorsed a plan Friday aimed at preventing another financial crisis like the credit and mortgage debacles that erupted in the United States and quickly sent tremors around the globe.

"Rapid implementation" of the plan "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 markets," the G7 officials said in a joint statement.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke hosted the Group of Seven discussions, where officials embraced a plan that would seek to increase the openness, or transparency, of financial markets and to sharpen regulators' response to urgent financial problems.

Besides the United States, the other members of the G7 are Japan, Germany, Britain, France, Italy and Canada. Friday's action preceded the weekend meetings of the 185-nation International Monetary Fund and the World Bank.

Risks to the United States and the global economy have intensified since finance officials from the Group of Seven countries last gathered here in October. Many economists now believe the United States has fallen into a recession and the odds of a worldwide downturn have risen sharply — to one in four — according to the IMF, a global financial firefighting institution.

Even as the financial officials talked about the best ways to battle future financial emergencies, Wall Street took another plunge. The Dow Jones tumbled more than 250 points.

"Given the significant short-term downside risks, we are taking action," Paulson said of the G7's decision to adopt the plan. "There may be more bumps in the road," he warned.

In the United States, where credit troubles sprang forth with a vengeance last August and quickly spread financial turmoil worldwide, the damage is sorely felt. Foreclosures have surged to record highs, job losses in the first three months of this year have neared the staggering quarter-million mark and financial companies have racked up billions of dollars in losses. The once mighty Bear Stearns, the fifth-largest investment bank in the United States, crashed, prompting a takeover by JP Morgan in a controversial deal backed by the Fed.

Worldwide financial losses could approach $1 trillion over two years, the IMF said earlier this week.

The Financial Stability Forum, a group that includes central bankers and major financial regulators from around the world, developed the plan adopted by the G7. The forum is headed by Mario Draghi, chief of Italy's central bank, who presented his group's findings to the other G7 officials during their closed-door meeting.

The plan is designed to make financial markets less secretive and improve supervision, which in theory would help prevent a repeat of the current financial debacles.

It calls for strengthening oversight to make sure financial companies have sufficient capital, cash and risk-management practices to handle problems. It also would bolster transparency and the valuation of complex investment products, improve the operation of credit-rating agencies, strengthen authorities' responsiveness to risks and put in place arrangements to deal with stress in the financial system.

One recommendation is to have banks, securities firms and other financial institutions disclose their holdings of risky securities, such as those backed by subprime mortgages given to people with tarnished credit. Those subprime mortgages, which soured with the collapse of the U.S. housing market, were at the heart of the U.S. crisis.

Another involves having credit rating agencies distinguish the ratings they give for regular securities, such as corporate bonds, from those they assign to more complex investments. These agencies have been criticized for contributing to the problems by not accurately assigning risk to mortgage-backed investments.

Yet another recommendation would strengthen supervisors' guidance to banks for dealing with cash crunches and having banks run "stress tests" to see how they cope under different scenarios of financial strain.

The plan also calls for the Basel Committee on Banking Supervision, an international body of regulators, to make sure banks have enough capital to cover any potential losses.

The G7 officials were meeting at a time when the value of the U.S. dollar was hitting record lows against the euro and has fallen sharply against Japan's yen.

"There have been at time sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability," the G7 statement said, pledging to closely monitor the situation and "cooperate as appropriate."

Ongoing efforts by the U.S., backed by the G7, to prod China to let its currency rise in value also were discussed. China's undervalued currency has been blamed for contributing to the United States' swollen trade deficit and the loss of millions of factory jobs. The G7 officials welcomed progress that Beijing has made on the currency front but said the country needs to move more quickly to let its currency rise in value.

Soaring oil prices also are complicating the global outlook.

In the United States, high energy prices are acting as a double-edged sword: they are causing people to spend less on other things, thus adding another drag on growth. And, they increase the risks of an inflation flare-up as other companies boost their prices in response. U.S. gasoline prices hit another record Friday of $3.365 a gallon, according to AAA and the Oil Price Information Service.

The G-7 finance officials had a dinner scheduled for Friday night that was to include executives of some of the world's biggest financial companies. The idea: Look at the causes and consequences of the recent financial turmoil. Officials invited to those talks included top executives of Citigroup, Deutsche Bank, Barclays, Credit Suisse, Lehman Brothers and Morgan Stanley.

[mcv57]

Posted by gce65

I will help with the axe-job, but only if we have the treasonist go first: Bush, Cheney, then the U.S. Supreme Court Judges. Congress will be a full-time job.

[mcv57]

Posted by SharnCedar

Don''t isolate the U.S Wall Street. Remember: Soc Gen (France) and Northern Rock (UK) - the world is filled with men who lust after the flesh.

[sharncedar]

Actually, these steps by the GG7 are reasonable - it sounds like they are trying to rein in some of the practices that have gone awry in the American financial markets. The US is a place of enthusiasm without caution; it was in NY (and still happening for example in the Fed today) that the risky financial innovations went from slightly dangerous to over-the-top American over-indulgence. We don''t do anything in a calm or cautious manner, and once the financial community in America started these crazy and lucrative new financial practices, we went in with both feet as usual, like the gold rush, like the land rush, we just are not a prudent or cautious nation.

We will learn to be more cautious, but the teacher will be suffering.

The G7 is saying here, " let''s tone it down you freakin America nutjobs" which is the right message, I know the Eurpopeans never really understood that opur Wall Street is not orderly at all, but a wild west insane orgy without boundaries, prudence, or rules. People in the rest of the wrold don''t get how foolish we are.

[gce65]

Veteran72:
I agree. Time for a revolution. Know where I can get a good slightly used guillotine?

[gce65]

The world economy is in the crapper thanks to US investment banker greed and dishonesty in packaging up junk mortgage-backed equities and selling them to other countries as if they were legitimate investments.

The US has blown it''s reputation and the rest of the world won''t be so trusting next time. But in the meantime, they''ll be happy to buy up as much of American industry as they can get.

[mcv57]

Gloomy outlook as General Electric''s light bulb flickers
By Damian Reece, Head of Business
Last Updated: 12:50pm BST 12/04/2008



If confirmation were needed that the US is in recession, then GE''s profit warning and gloomy outlook is it. The whole statement is riven with gloom.

General Electric sparks panic with profit alert
These first-quarter figures from the giant conglomerate coincide with a monetary easing in the US which has seen rates fall by 300 basis points to 2.25pc. But not only has sentiment, never mind behaviour, in the US economy continued to slide during this period of frenetic Federal Reserve activity, it is very obviously getting worse.

advertisementOne of the striking things about the commentary of GE chief executive Jeff Immelt, which accompanied the GE quarterly statement, is how things seem to be deteriorating, particularly in the last two weeks of March.


The Fed''s interest rate cuts were never going to have an immediate impact but the fact that the bad news is accelerating for GE is worrying and suggests that the Fed''s actions are not even improving sentiment.

This proves that such "slash and hope" policies are likely to make little short term difference to the US but will store up inflationary problems for the future, which will have to be solved with a painful bout of higher interest rates.

[mcv57]

A world filled with self-gratification, unquenchable lust for wealth, and a corporate, law enforcement and government burearacy maze that is perversed and corrupt. This social manfestation is a reversable cancer in America moral, ehthic, and order. TELL HOW IN THE WORLD IS THE G7 GOING TO ABATE THIS DEBACLE???
President Nixon describes this political and social chaos as "A WILD BEAST."

Simple, they can''t. This article only represents a propaganda campaign to ease the financial public environment from panic; otherwise, the rich will grow poor overnite and the established government and law enforcement would lose control.

[bgwinnett]

Too late to stop this Depression.Perhaps it''s in preparation for the 4th great Depression starting in 2029 under the Emperorship of Jenna Bush III " The Youger and even Dumber".

[forthepeopl1]

While Democrats in Congress are pushing for a more aggressive program to help an estimated 2 million homeowners at risk of defaulting on their mortgages, Paulson said the administration believed its plan, which relies heavily on voluntary efforts by the private sector, was the best approach.

Regarding the larger proposals, Paulson told reporters Friday night, "I see very little likelihood that anything like that will pass."

MR.POTATOHEAD PUALSON, A WALLSTREET INSIDER AND BUSHES MOUTH PEICE, SAY WALLSTREET SHOULD NOT TAKE A HIT..WHAT BULL S/H/I/T/ THEY DID IT AND THEY SHOULD GET TO GO DOWN THE DRAIN JUST LIKE US AMERICANS..

[forthepeopl1]

AS I HAVE STATED SO MANY TIMES ON HERE. WHEN WILL AMERICANS TAKE TO THE STREET AND WALK TO WASHINGTON AND TAKE THIS ILLEIGAL GOVERNEMNT OUT.

ITS TIME TO TAKE OUR COUNTRY BACK FROM THE ELLEIT,WEALTHY, AND LIKE OUR CONSTITUTION STATES WE CAN DO READ IT..IF THE WILL OF THE AMERICANS OUR NOT BEING FOLLOWED, THAT ITS UP TO THE AMERICANS TO CHANGE IT, AND START A NEW GOVERMENT FOR THE PEOPLE BY THE PEOPLE...THIS DOESNT MEAN WE HAVE TO HAVE ELECTIONS!!THIS MEANS TAKE TO THE STREETS AND DRAG THEM OUT...AND TAKE OUR COUNTRY BACK..

SO IS EVERYONE READY YET?????