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Palin Hong Kong Speech Blames Government For Financial Crisis
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Former U.S. vice presidential nominee Sarah Palin, criticized for her lack of foreign policy experience, emerged in Asia on Wednesday to share her views from “Main Street U.S.A.” with a group of high-flying global investors.
In her first trip to the region, the former Alaska governor addressed an annual conference of investors in Hong Kong in what was billed as a wide-ranging talk about governance, economics and U.S. and Asian affairs.
Two US delegates left early, according to AFP, with one saying “it was awful, we couldn’t stand it any longer.” He declined to be identified.
“I’m going to call it like I see it and I will share with you candidly a view right from Main Street, Main Street U.S.A.,” Palin told a room full of asset managers and other finance professionals, according to a video of part of the speech obtained by The Associated Press. “And how perhaps my view of Main Street … how that affects you and your business.”
Palin spoke out against government intervention in the economy. “We got into this mess because of government interference in the first place,” Palin said, according to the Wall Street Journal. “We’re not interested in government fixes, we’re interested in freedom,” she added.
She also praised the conservative economic policies of former U.S. President Ronald Reagan and former British Prime Minister Margaret Thatcher, according to another attendee who declined to be named because he didn’t want to be seen as speaking on behalf of his company.
She claimed that if taxes were cut and the capital gains tax and estate tax eliminated, the world would “watch the U.S. economy roar back to life.”
Palin argued that many average Americans are uncomfortable with health care reforms that infringe on private enterprise, Chris Palmer, an American fund manager for Gartmore Investment Ltd., told reporters.
U.S. To Push For New Economic World Order At G20
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The United States will urge world leaders this week to launch a new push in November to rebalance the world economy, but there are doubts national governments will bow to external advice.
A document outlining the U.S. position ahead of the September 24-25 Group of 20 summit in Pittsburgh said exporters, which include China, Germany and Japan, should consume more, while debtors like the United States ought to boost savings.
“The world will face anemic growth if adjustments in one part of the global economy are not matched by offsetting adjustments in other parts,” said the document, which was obtained by Reuters on Monday.
The framework drafted by U.S. policy makers foresaw analysis of G20 members’ economic policies by the International Monetary Fund to figure out if they were consistent with better balanced growth.
“We call on our finance ministers to launch the new framework by November,” the document said, signaling a determined effort to maintain momentum for change created by last year’s global financial crisis.
The United States envisages the IMF playing a central role in a process of “mutual assessment” by making policy recommendations to the G20 every six months.
Finance ministers and central bankers from the G20 countries are due to meet November 7-8 in Scotland.
European Central Bank President Jean-Claude Trichet said persuading Europe, the United States and China to accept IMF advice on economic policy may be difficult. In the past, many countries have ignored suggestions the IMF dished out in regular reviews.
Trichet told French newspaper Le Monde the G20 had made progress on reforms to make the financial system more stable after the crisis.
“The most difficult question is still open: Europe, America, China, are they ready to modify their macroeconomic policies in the future — by following the advice of the IMF and under pressure from their peers, for the common good, and world economic stability?” he said in the piece on Monday.
G7 sources told Reuters there was a renewed determination to cooperate because the crisis had driven home the interconnected nature of the global system. That said, governments would not allow themselves to be told what to do.
“We can’t get to a situation where any country is giving up its own decision-making,” said one source, who spoke on the condition of anonymity.
Germany, a major exporter to the United States, was singled out on Sunday by U.S. President Barack Obama as a country that, like China, exports a lot but does not buy much back.
But a top European Union official said that the euro zone, where 16 countries share a common currency, had to act as a collective.
“It is difficult to think about one country without taking into consideration what is the impact in the euro area,” European Commission President Jose Manuel Barroso told reporters in New York.
Taxpayer money to the tune of $5 trillion has been pumped into the world economy to keep it from seizing up since the beginning of the crisis last September.
G20 leaders will maintain that pace of stimulus while acknowledging that at some point it will have to be wound down, the document said.
But, mindful of how a disorderly rush to raise interest rates could roil world markets again, they will also ask finance ministers to thrash out a “transparent and credible” exit strategy.
There were no details of how to achieve this in practice, but the document echoed the caution of G20 finance ministers at their meeting in London earlier this month acknowledging the pace of change would vary by country.
Simon Johnson, a former chief economist at the IMF, warned there was a risk the Pittsburgh summit would be an empty public relations exercise.
“The point of the meetings is to try to reassure themselves and everyone else that they’re broadly on track and have a round of applause and some back patting,” he said.
But John Bruton, the EU ambassador to Washington, said it was important not to ignore the summit’s symbolic power.
“I think we’re seeing the beginning of a conversation between world leaders,” he told Reuters in an interview.
Administration Unveils Bank Capital Proposal
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The Obama administration on Thursday proposed stronger international standards for the capital reserves that banks are required to hold. The goal is to avoid a repeat of last year’s severe financial crisis.
The administration released a 14-page outline that would require higher capital cushions for firms deemed to be so large and interconnected they pose a threat to the overall stability of the financial system.
Treasury Secretary Timothy Geithner is slated to discuss the U.S. proposals during two days of meetings in London among the Group of 20 nations that begin Friday.
Under Geithner’s proposal, a comprehensive international agreement should be reached by the end of 2010 with countries agreeing to implement the measure by the end of 2012. The administration is hoping to get broad agreement among major countries on raising capital standards so that financial institutions in the United States wouldn’t be put at a disadvantage if capital standards in the U.S. are raised to higher levels than their competitors face in other nations.
Many experts believe the crisis occurred at least in part because current bank regulations don’t impose strict enough requirements for the reserves a bank must hold to cover potential loan losses.
“The global regulatory framework failed to prevent the buildup of risk in the financial system in the years leading up to the recent crisis,” the Treasury Department said in a statement issued Thursday. “… Going forward, global banking firms must be made subject to stronger regulatory capital and liquidity standards that are as uniform as possible across countries.”
Treasury said the new principles “should guide reform of the international regulatory capital and liquidity framework to better protect the safety and soundness of individual banking firms, and the stability of the global financial system and economy.”
Under the proposed policy, capital requirements for all banks and financial firms would be increased while those for firms deemed to be systemically risky would have higher required capital levels than the others.
Banks and financial firms would be subject to conservative, detailed standards for the amount of cash they are required to hold.
The rules for measuring risks in banks’ portfolios and the capital needed to protect against them would be improved.
G20 Aims At Bank Pay And Capital-Stimulus To Stay
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G20 finance leaders on Saturday took aim at excessive bank pay and risk-taking at the root of the financial crisis and insisted trillions of dollars of emergency economic supports would be needed for some time.
Although the global economy looks brighter than when the Group of 20 finance ministers and central bankers met in April, their closing statement said they would not remove economic stimulus until the recovery was well entrenched.
While the timing of these eventual policy reversals may vary, the G20 said for the first time there should be some coordination to avoid adverse international fallout.
But as the focus shifted from crisis-fighting to establishing a safer financial system for the future, ministers searched for consensus on precise plans to rein in bankers’ huge bonuses and use more of their profits to build buffers against any future crisis.
“We cannot put the world in a position where things go back to where they were at the peak of the boom,” U.S. Treasury Secretary Timothy Geithner said.
“It cannot happen, will not happen and you can’t expect the markets to solve that problem on their own because it’s a huge collective action problem…so it has to come through things that countries legislate.”
EXIT, BUT NOT NOW
On the public stage, the message was one of solidarity as policymakers agreed they must keep spending the $5 trillion already earmarked as economic stimulus and delay any unwinding of emergency fiscal and monetary measures until economies are sturdy enough to stand on their own.
“The classic errors of economic policy during crises are that governments tend to act too late with insufficient force and then put the brakes on too early,” Geithner said. “We are not going to repeat those mistakes.”
In a final statement, the G20 officials from rich and developing countries also said they would work with the International Monetary Fund and Financial Stability Board to develop cooperative and coordinated exit strategies.
Behind the scenes, some G20 sources expressed frustration that there was not more progress made in curbing excessive pay packages for bankers — particularly those employed by firms that have received billions of dollars in government support.
“There is broad agreement on what to do. The problem is we need to go beyond agreement. We need to have concrete measures,” said International Monetary Fund chief Dominique Strauss-Kahn. “I’m impressed by the level of consensus but I’m still waiting for strong measures to be decided and also to be implemented at the national level.”
BANK PAY AND BUFFERS
Much of the public pressure before the meeting had centered on excessive bank remuneration, particularly for those who worked at banks receiving billions of dollars in public aid.
“It is offensive to the public whose taxpayers’ money in different ways has helped (keep) many banks from collapsing and is now underpinning their recovery,” British Prime Minister Gordon Brown said at the start of Saturday’s meetings.
On pay and bonuses in the financial sector, the statement fell short of calling for caps, saying that: “We also ask the Financial Stability Board to explore possible approaches for limiting total variable remuneration in relation to risk and long-term performance.”
That was seen as a compromise between France and Germany, which had pushed hard for pay limits, and Britain, the United States and Canada, which were opposed to caps. But it also effectively delayed a tricky political issue until the Pittsburgh summit later this month.
Finance leaders broadly agreed that banks ought to hold more capital as a cushion against the sort of catastrophic losses that led to bank failures and bailouts.
The final statement said that banks would “be required to hold more and better quality capital once recovery is assured.”
Geithner called for “greater urgency” on regulatory reform and cautioned that as the crisis recedes and the economy improves, the momentum for reform may wane.
He had surprised many of his colleagues by releasing an 8-point proposal on new capital rules just two days before the G20 meeting, with some ministers saying they did not have time to review it.
It is a delicate issue because tighter capital rules would likely hurt banks’ profits and restrict their lending, both of which could be harmful to the economy.
CHANGING WORLD ORDER
The statement showed agreement that emerging nations like India and China should have a greater say in the running of the International Monetary Fund and World Bank but did not offer up any formula of how this should be achieved.
It said only that their voice in global economic policymaking would grow “significantly” and that it expected “substantial progress” to be made on the issue at a summit of world leaders in Pittsburgh later this month.
But the group said reforms need only be completed by the existing deadline of 2010 for the World Bank and 2011 for the IMF.
The BRIC group of leading emerging powers — India, China, Russia and Brazil — had laid out on Friday concrete targets for how much movement they wanted in IMF and World Bank quotas.
Central Bankers To Mull Crisis Lessons At Retreat
Posted by: | CommentsTwo years after the start of the worst global financial crisis since the Great Depression of the 1930s, policy-makers from around the world gather this week to think about how to prevent it from happening again.
The Kansas City Federal Reserve’s yearly conference at a mountain retreat in Jackson Hole, Wyoming, will draw central bankers and top economists together at a time when the crisis appears to be easing, with the global economy on the mend.
The event will be a showcase for Fed Chairman Ben Bernanke to reflect on the lessons learned and assess whether signs of recovery are lasting.
Bernanke, who speaks at 8 a.m. Mountain time (10:00 a.m. EDT) on Friday, may build on the Fed’s view that while the U.S. economy is regaining its balance after the deepest dive since the 1930s, any rebound will be slow and fraught with risks.
“Bernanke’s speech is the big deal,” said John Silvia, chief economist for Wells Fargo Securities in Charlotte, North Carolina. “Is this thing really over? Is it three-quarters over?”
Questions about Bernanke’s reappointment to a second four-year term as chairman of the Fed — the U.S. central bank — will also hang over the event.
His current term expires on January 31 and President Barack Obama has yet to indicate whether Bernanke will be renominated. Analysts expect a decision by the end of October.
CRISIS EASING
A year ago in Jackson Hole, officials hunkered down for private behind-the-scenes crisis-management talks. At that time, financial stress was intensifying, although the most virulent phase of the crisis would not be triggered until a few weeks later when Lehman Brothers bank collapsed.
Now, with Germany, France and Japan having pulled out of recession and the United States appearing in better health as well, officials are breathing easier. Still, economies remain on life support, with full recovery not yet assured.
“I am not convinced that the recovery is sustainable yet,” European Central Bank governing council member Axel Weber told German weekly Die Zeit when asked about Germany’s economy.
Speaking a little more than a week after the Fed declared the U.S. economy to be leveling from a deep recession, Bernanke will likely take a stand-back approach in keeping with the academic nature of the conference and his professorial roots.
Bernanke, European Central Bank President Jean-Claude Trichet and other central bankers could use the occasion to claim credit for emergency programs that have helped restore financial stability, and could point to much-settled-down indicators of risk in money markets as evidence of success.
“They can say, ‘We’ve taken a lot of actions; we have a lot of success,’” said BNP Paribas economist Julia Coronado in New York.
Even so, with pockets of risk remaining, such as the shaky U.S. commercial real estate market, policy-makers who failed to recognize the dangers of subprime mortgage exposures are likely to be cautious in declaring victory.
CENTRAL BANK EFFECTIVENESS
Participants at the conference, which runs into Saturday, will likely also debate how effective central banks can be in spotting asset bubbles, such as the run-up in U.S. housing prices that triggered the financial meltdown, and what tools they can use to prevent turmoil.
Bernanke will need to convey confidence in the Fed’s path toward economic recovery without raising expectations for an assured bounceback that could lead financial markets to anticipate a quick withdrawal of the central bank’s monetary support for the economy.
With hopes for a U.S. recovery pinned on reinvigorated auto sales and a long-awaited upturn in housing markets, analysts worry a rebound could die out in six months.
Even as he tamps down expectations about recovery, Bernanke will want to be emphatic that the Fed can pull back from the low interest rates and flood of cash it has pumped into the economy quickly enough when the time comes to avoid inflation.
