G-20: Commitments, Comments, Questions!!
By Larry Doyle on April 2, 2009 at 4:15 PM in Banking Institutions, China, Economic Stimulus, Economy, Equity Markets, European Union, G20, Global Finance, International Monetary Fund
British Prime Minister Gordon Brown just delivered a statement highlighting the results of the G-20 conference in London. There must have been a lot of work done behind the scenes over the last few months because it’s hard to imagine there was a lot of debate over issues within a 36 hour time frame at this conference. I will grant the world’s political leaders their due as it is most important at times like these to convey a strong, uniform front.
Let’s review the objectives and commitments, each followed by questions and/or comments that I have:
1. Address countries providing tax havens.
My question: who will police?
2. Develop a Financial Accounting Stability Board to regulate currently unregulated financial entities, primarily hedge funds.
My questions: how will it be staffed, operated, and judgments adjudicated? (I don’t like FASB as the acronym to be confused with Federal Accounting Standards Board)
3. Develop global policies and outline to address compensation
My questions: who and how will this be implemented? how will it be regulated? will there be punishments for those not participating?
4. Develop a global systemic risk oversight body.
My Question: who and how?
5. Develop a common global approach to address toxic assets within the banks.
My Questions: will this approach be akin to the FASB relaxation of the mark-to-market? How will it be implemented? Will it employ free market principles or manipulate those principles?
6. Utlilize a global growth and recovery stimulus plan of $5 trillion via global central banks.
My Question: will every country and region go along with this?
7. Global central banks will maintain a fiscal expansionary posture.
My Question: what if inflation increases?
8. The IMF and other international agencies will receive $1 trillion. $750 billion directed to the IMF, $250 billion of which will be in the form of Special Drawing Rights. The G-20 will look for these international institutions to strengthen their independence. The G-20 looks for emerging economies and developing countries to get a greater voice in these international institutions.
My Comment: China just won BIG RIGHT HERE!!
9. The G-20 countries will look to kickstart international trade.
My Question/Comment: Congratulations!! How do they plan on doing this in the face of the global protectionist measures and financial protectionism being enacted everywhere?
10. The G-20 will meet in New York City again in September.
My Comment: is this really a very good idea? Can you imagine the rioting that may ensue there? I wonder if body piercing is optional to get involved in the fun?
In summary, the global equity markets are responding positively to these commitments along with the relaxation of the mark-to- market. I am concerned that free market principles have taken a back seat to potentially excessive political and accounting manipulation. That said, the global economy and global banking system will receive significant hard dollars along with significant accounting cover to help itself heal. My personal opinion is world leaders are trying to buy time but will risk real inflation to heal the global recession.
I will say, though, there will certainly not be a dearth of material for Sense on Cents to address as we navigate the economic landscape!!
LD
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Sounds like a good start, if there’s going to be a “global economy.” We’ll see how the plan progresses. Like Larry, I have questions.
Did y’all see the video of him giving the Summit speech? He looks STONED again. He’s claiming it’s a cold. Good lord.
I didn’t think he looked good yesterday. Probably going through withdrawals. That can cause serious complications. Sad that our leader is unhealthy, isn’t it? Maybe he should step down for health reasons. Then Biden can step down, also for health reasons, then Pelosi can step down for mental health reasons, then who ever is next (sorry-I forget), can step down for some reason and then we’ll let Hillary clean up the mess left behind!
The man has a flat affect. It’s either drugs or brain damage.
He looked absolutely ripped.
He certainly is not all there, whatever “all” might mean about him. I don’t think his WH garden plot contains only arugula.
Years ago, after recovering from surgery, Reagan clearly showed signs of increasing diminished capacity. Daniel Shorr was the only one I heard mention it. I look forward to the publication of his annual presidential physical.
Larry wrote: “I don’t like FASB as the acronym to be confused with Federal Accounting Standards Board.”
Well, you obviously haven’t read any good Marxist revolution playbooks. This is a standard “play” to create confusuion. Or, alternatively, it could just be stupidity. Perhaps the drafter of the policy wasn’t congnizant of the “other ” FASB.
The word that bothers me most in all of this is “global.” The problem that I have with it is that we are the richest economy on the planet. Putting us in a “democracy” with lesser economies means that they will vote for us to pay for everything. That is the plan for how America’s wealth will be distributed around the world.
Of course, all of this is pretty much in conflict with the Constitution of the United States. The mere fact that our elected representatives are pledged to support and defend said Constitution, even as they go about trashing it, doesn’t bother them because they know that the American people won’t call them on it. Well, at least we haven’t called them on it, yet. There’s always 2010.
Didn’t Obama say we couldn’t continue to keep our thermostats at 70 degrees and eat whatever we want and think the REST OF THE WORLD would be okay with that?
The global thing bothers me too. Those New World Order conspiracy theories sound a little far-fetched until you read stuff like this.
Where’s the “whitey” tape???
Wow–it’s been so long since I’ve seen a “whitey tape” troll on NQ, it almost brings tears of nostalgia to my eyes . . .
In the Saudi king’s ass. Did’nt you see the Mess-I- Uhh bowing and scraping before Dubya’s former BFF thanking him for helping him in so many ways?
Thanks, Larry, as ususal for the good summary and your very astute questions that need answers!
“Develop global policies and outline to address compensation”
I think one of the major problems with compensation was boards that got to cozy to the executives and failed to look out for the best interest of the stock holders (too many boards were filled with high priced yes men who were essentially paid to not look into things too deeply and go along with whatever the executives told them to do). I’m not sure if having compensation levels dictated by some type of global regulatory body is the way to go though.
Connecting compensation to long term profitability, providing for claw back provisions and holding executives and board members accountable could go a long way without making companies subservient to a global body.
I love how the evil hedge funds need to be regulated, what a joke. The last time I checked the highly regulated banks and brokerage firms are at the epicenter of this problem. A problem created by politicians, (Dodd, Schumer, Clinton) who exempted these institutions from the regulations in Sarbanes Oxley because it would have negatively impacted the local economy. In fact the hedge funds that failed closed and the ones that saw the freight train coming cashed in. When you look at the banks and brokers you see nothing but government hand outs. Governments want to bring hedge funds under their control because they currently operate outside the grip of the political elite.
Actually, the assets that are causing the problem, the mortgage securities and credit default swaps, have been almost completely unregulated.
Here is the problem: The thing that the government is supposed to do, which is to set up fair transparent rules so no one cheats and investors don’t get Enron-ed, they have failed to do. They are supposed to ref the game, kick out the cheaters, and keep any entity from becoming so big that true competition is destroyed (even Adam Smith said monopolies would kill capitalism.)
The thing that govt is not supposed to do - like take the field, run with the ball, fiddle with the player roster, make their own bets on particular players, etc - they have been doing.
They’d much rather we all yell at each other screaming “Too much govt! No, not enough!” because that distracts us from turning any righteous anger on them and saying, “Do your damn JOB, but otherwise stay out of the way!”
You are mistaken with regards to mortgage securities. these instruments are regulated as are CDS markets. They are not directly regulated through a federal agency or exchange but rather through the ratings companies. If the ratings companies didn’t give a security an investment grade rating then institutions never would have bought them. The ratings companies, are licensed by the government, were forced to provide ratings for these new instruments. In fact when several companies wanted to get into the ratings game, circa mid 2000s, they were denied are declined a license because they would have been forced to rate CDS, CDO and other complex securities. Once again regulation gave the ignorant the idea that these instruments were safe.
Adam Smith never said monopolies are inherently bad rather that “Legislative Monopolies or Monopolies maintained through Fraud,” are bad. Is microsoft bad because it is dominant or is it dominant because it product is superior? I’m not attempting to dismiss MSFT actions in forcing companies to only install MSFT applications. I haven’t heard anyone complain about APPL for refusing to open the ITUNES application so it functions on other MP3s. Monopolies that thrive and provide their product or service at the best price should not be discouraged but encouraged unless they behave in an illegal fashion. We have plenty of laws on the books to deal with this type of behavior.
The problem we face today is caused by people in the financial world who refused to do their own due diligence. The relied on others to ensure that the investments they engaged in were safe and secure. This is why Greenspan was surprised by the situation. No one, including Greenspan, ever thought that investment/ financial firms would ever blindly invest in instruments they either didn’t understand or accurately and thoroughly analysis.
Oddly enough this premise worked with Madoff. There were many investors who walked away from Madoff because they couldn’t understand how and what he did. With such uncertainty they declined to invest. In fact many reported his activities to the SEC when they discovered he was a fraud. It was the SEC that dropped the ball not the market. The market actually uncovered his fraud but regulators declined to act. Madoff used his political connections to thwart any serious inquiries into his firm’s actions. Blindly relying on others to do you job is certainly the road to failure.
then who ever is next (sorry-I forget),
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President pro tempore; Robert Byrd
But I doubt a 91 year old man is going to take over the presidency. I think he’d defer to Hillary, the next in line. Not that this will happen.
O/T Blago just got indicted in 16 felony charges! SING BLAGO SING!
i hope he sings like a canary…..
I hope it’s a GD opera!
Hey, what’s that off in the horizon…It’s the USS OFraud sinking like the Titanic.
Go, Blago, GO!!!!!!
#8 is disturbing, more evidence of a coming new world order.
#11 is outright looking for trouble. why bring the next meeting to the very place that many in the world blame for this mess.
I have a major problem with any sort of international “regulatory board”. It’s an issue of sovereignty for me.
I have no problem with the US agreeing to some well laid out standards for bank asset levels, hedge fund operations, etc, so long as those standards are clear, and we sign off on adhering to specific rules, just as we would any other treaty or international agreement - pursuant to the approval of 2/3 of Congress.
But I would be UTTERLY opposed to setting up any sort of independent entity that is an outside regulatory agency that the United States must be subject to in an ongoing manner. No way, no how.
We remain a SOVEREIGN nation, period. We may agree to cooperate on specific guidelines, and bind ourselves by treaty to adhere to certain rules - we do that all the time with various treaties and agreements. But we shall NOT be subject in perpetuity to any “higher authority” outside our borders. NO.
LD asks: 1. Address countries providing tax havens.
My question: who will police?
lol Funny. Surely it better not be us, as we’re really not in to that.
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Auh, Hedge Funds, Obama’s big contributors and whom he’s helping further with his new bailout plan to loan our tax dollars risk free, just walk away if it doesn’t work out, to buy up the “bad and toxic assets” from banks. MMHMM.
Obama is a sell out!
The defeatist’s in America have taken the bait and the rest of the world is laughing at our capitulation.
That pansy azz is going to get us blown to Kingdom Come. What a crapstain on America Obama is. All the blood that was shed to create this fantastic nation, and a bunch of scumbag Obots in one fell swoop vote to “change” it to Cuba. I’m ashamed of America.
Hey Fed up,
The obots sure think they have a revolution going.
What’s amazing about my catholic church is that we’re packing them in with no seating available left in the pews.
The real revolution is being hatched out of the need for traditional values patriotism and the understanding of the existential threats facing this country.
You can’t have victory for America in the world if you wish defeat.
Curious. Is your church build up just about the Easter time period or is it substantially more than the usual increase in church attendance at Easter?
Thanks for asking.
My Catholic church is the 2nd largest in Seattle and back in the 90’s when I first started attending was gentrified and without life. Over the years especially in the last two years I have seen a dramatic change. Many young couples with children and so much enthusiasm.
I’m proud that we help feed a thousand people every Sunday and am involved in every way with helping people navigate the rough and tumble of life.
Easter does bring in more of the lay community and we have to set up extra chairs for these good Catholics.
I look pretty cool in an Alb and will be the Lector at several masses
http://www.blessed-sacrament.org/index.html