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IMF, World Bank meet amid financial mayhem
2008-10-11
The International Monetary Fund and the World Bank opened their annual meetings Saturday in the midst of global financial chaos that has governments racing to find the means to tame it. The meetings follow Wall Street's worst week on record and a pledge by the Group of Seven major economies late Friday to use "all available tools" to support major banks and prevent their failure. Finance leaders from the twin institutions' 185 member nations and private financiers gathered in Washington in search of an effective response to the crisis that has slowed the advanced economies to a standstill. US President George W. Bush, who hosted a crisis meeting early Saturday at the White House with G7 finance chiefs, said that the world's richest economies agreed the financial meltdown requires "a serious global response." Bush met for about 40 minutes with G7 finance ministers from Britain, Canada, France, Germany, Italy and Japan, as well as International Monetary Fund chief Dominique Strauss-Kahn and World Bank president Robert Zoellick. But the US president unveiled no new proposals to combat the fast-moving global financial crisis, the worst since the 1930s Great Depression. The accelerating meltdown has brought a new sense of urgency for cooperation. Central bank chiefs and finance ministers of the Group of 20, a grouping that includes both rich and emerging nations, are to hold a crisis meeting Saturday in Washington. In Europe, French President Nicolas Sarkozy has called a eurozone summit in Paris on Sunday as European leaders appeared to move towards a British-style plan of partial bank nationalization. US Treasury Secretary Henry Paulson said Friday the US government plans to invest directly in US banks for the first time since the Great Depression, expanding the focus of the government's 700-billion-dollar rescue plan. The bailout package had initially focused on the problem of liquidity for banks by offering to buy up their toxic assets. In a five-point action plan agreed late Friday, the G7 agreed to "take decisive action and use all available tools to support systemically important financial institutions and prevent their failure." Paulson said late Friday he expected emerging nations in the G20 to sign up to the G7 plan. "I would be surprised ... if they didn't look at the action plans and didn't endorse them," Paulson said. "Never have all of us been so dependent on the other and so interdependent. We need to work together." The G20 includes the powerhouse emerging economies of Brazil, China, India and Russia. Germany called Saturday for the IMF to rethink and strengthen supervision of the world's finances as the only body capable of doing so. "It is important to create an entirely new and global supervision of finance by the IMF," Foreign Minister Frank-Walter Steinmeier said in an interview with the magazine Der Spiegel due to be published Monday. "The IMF is the only instrument established with a wide area of responsibility and high authority over the markets." But Paulson cautioned the IMF against casting its net too wide. "As it reviews its lending role, the Fund must keep its core mission in mind and resist seeking creative ways to boost lending for its own sake," Paulson told the IMF Saturday. "We are skeptical of proposals to significantly increase access levels for lending." Strauss-Kahn called Friday for multilateral institutions to be strengthened in the light of the crisis, hoping that the IMF and World Bank meetings would constitute "a good departure" for such a reform. "We also need a world group on finance, an enlarged G8 (Group of 8) to discuss a new order for global financial relationships," Steinmeier said. "Besides the G8 countries (Britain, Canada, France, Germany, Italy, Japan, Russia and the United States) it should include economic powers such as Brazil, India and China, with the same rights and duties, and perhaps a country from the Arab world." Amid the financial crisis there were growing worries that rich donor nations would curb aid to developing countries and the poor. World Bank president Zoellick this week warned that the recent financial turmoil could prove a "tipping point" for many developing countries, "threatening not just to knock the poorest people down, but to hold them down." "Over recent weeks, attention has focused on the size of financial packages and on the impact on Main Street. There are Main Streets all over the world," said the head of the development lender. "We cannot let a financial crisis become a human crisis." Germany's executive director at the World Bank, Michael John Hofmann, told the German radio station Deutschland Radio Kultur Saturday that countries such as the United States "are forgetting about the consequences of the (financial) crisis" which is impacting heavily on Africa.
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