"1. We have taken decisive, coordinated and comprehensive action to boost demand and jobs, and are prepared to take whatever action is necessary until growth is restored. We commit to fight all forms of protectionism and maintain open trade and investment.
2. Our key priority now is to restore lending by tackling, where needed, problems in the financial system head on, through continued liquidity support, bank recapitalisation and dealing with impaired assets, through a common framework (attached). We reaffirm our commitment to take all necessary actions to ensure the soundness of systemically important institutions.
3. Fiscal expansion is providing vital support for growth and jobs....
4. Interest rates have been cut aggressively in most countries, and G20 central banks will maintain expansionary policies as long as needed, using the full range of monetary policy instruments, including unconventional policy instruments, consistent with price stability.
5. We are committed to helping emerging and developing economies to cope with the reversal in international capital flows.....
6. To further strengthen the global financial system we have completed the immediate steps in the Washington Action Plan and we welcome the Financial Stability Forum's (FSF) expansion to all G20 members. We remain focused on the medium term actions, and make recommendations to the London Summit to ensure:
- -- all systemically important financial institutions, markets and instruments are subject to an appropriate degree of regulation and oversight, and that hedge funds or their managers are registered and disclose appropriate information to assess the risks they pose;
- -- stronger regulation is reinforced by strengthened macro-prudential oversight to prevent the build-up of systemic risk;
- -- financial regulations dampen rather than amplify economic cycles, including by building buffers of resources during the good times and measures to constrain leverage; but it is vital that capital requirements remain unchanged until recovery is assured;
- -- strengthened international cooperation to prevent and resolve crises, including through supervisory colleges, institutional reinforcement of the FSF, and the launch of an IMF/FSF Early Warning Exercise.
- regulatory oversight, including registration, of all Credit Rating Agencies whose ratings are used for regulatory purposes, and compliance with the International Organisation of Securities Commissions (IOSCO) code;
- full transparency of exposures to off-balance sheet vehicles; the need for improvements in accounting standards, including for provisioning and valuation uncertainty;
- greater standardisation and resilience of credit derivatives markets; the FSF's sound practice principles for compensation;
- the relevant international bodies identify non-cooperative jurisdictions and to develop a tool box of effective counter measures.
It appears that Geithner has agreed to almost all of the Sarkozy-Merkel proposals for the April meeting. This statement seems to imply the international regulation and control of hedge funds, derivatives, credit rating agencies, off-balance sheet accounting, and the like. This statement is an acquiesence of the regulatory paradigm which we have been speaking of for the past few months. This will taake from the hands of Congress much of its regulatory authority if passed. However since this would be a treaty and the Senate need approve, one can expect a massive fight to ensue.
In an accompanying story by Reuters there is a continuing and expanding rift. The article says:
"The absence of a coherent, coordinated fiscal response globally could damage consumer and business confidence going forward," said Neil MacKinnon, director and chief economist at ECU Group, a hedge fund based in London.
"A lot of this may have been discounted (by markets) last week. I don't think there's anything (in the statement) to surprise the markets," MacKinnon said.
He didn't think markets would react strongly to the statement one way or the other, and instead highlighted the negative impact on financial assets that would result from the euro zone's stance on fiscal policy."
This second story seems to imply that despite the US agreeing to the new "Internationale" regulatory regime that the gang of 19 others did not agree with the massive handouts that the US has set to provide. One wonders that after China's Wen chastising the Administration why any nation would follow the path of the US, setting itself afloat on a sea of trouble.
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