G-20 Backs Regulation Crackdown, $1.1 Trillion Aid (Update4)

G-20 Backs Regulation Crackdown, $1.1 Trillion Aid (Update4) - 4/2/2009

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G-20 Backs Regulation Crackdown, $1.1 Trillion Aid (Update4)
Simon Kennedy and Kitty Donaldson

Bloomberg.com. April 2, 2009
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EXCERPT: World leaders agreed on a regulatory blueprint for reining in the excesses that fed the worst financial crisis in six decades and pledged more than $1 trillion in emergency aid to cushion the economic fallout. The Group of 20 policy makers, meeting in London, called for stricter limits on hedge funds, executive pay, credit-rating firms and risk-taking by banks. They tripled the firepower of the International Monetary Fund and offered cash to revive trade to help governments weather the turmoil resulting from the surge in unemployment. They avoided the divisive question of whether to deliver more fiscal stimulus to their own economies. The statement amounts to an effort to rewrite the rules of capitalism to address an integrated world economy that has outgrown the ability of nations to keep it in check. The assembly echoed -- on an international stage -- the introduction in the U.S. of securities regulation after the 1929 crash. “By any measure the London summit was historic,” President Barack Obama said after the talks. U.K. Prime Minister Gordon Brown said, “we have reached a new consensus that we take global actions together to deal with the problems we face.” The measures to fight the recession and reform finance helped push U.S. stocks up, extending a global advance, and Treasuries down. The Dow Jones Industrial Average exceeded 8,000 for the first time since Feb. 10. ‘Systematic Cooperation’ Even as the G-20 leaders said they will maintain power over their own markets and companies rather than cede it to a cross- border regulator, they closed ranks behind “greater consistency and systematic cooperation” to flesh out a new regulatory order first outlined at a November meeting in Washington. The crackdown is “a major step forward,” Nobel laureate Joseph Stiglitz, a professor at Columbia University, said in an interview. “It’s a historic moment when the world came together and said we were wrong to push deregulation.” Blaming “major failures” in regulation as “fundamental causes” of the credit crunch, the G-20 said national regulators will be revamped to better monitor threats to the international system. A new Financial Stability Board will be established to unite regulators and join the IMF in providing early warnings of potential threats. Once recovery is underway, work will begin on new rules aimed at avoiding excessive leverage and forcing banks to put more money aside during good times.

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