“It is true that this crisis included failures by lenders and borrowers, by financial firms, by governments and independent regulators,” he said on Thursday. “But the crisis was not a failure of the free-market system. And the answer is not to try to reinvent that system.”
Absent from the discussions was President-elect Barack Obama, who favors stronger regulation and sent former Secretary of State Madeleine Albright to meet with global leaders on his behalf.
British Prime Minister Gordon Brown emerged once again as a kind of broker between the United States and Europe, offering proposals that take a step toward stricter supervision of big banks by establishing a “college of regulators” for each bank, but stop short of heavy-handed regulation.
Besides brokering some preliminary comprises on the question of bank regulation, Mr. Brown also spent weeks drumming up support from Persian Gulf oil states and Japan for providing the IMF with additional funding to address emergencies in developing nations. And he was instrumental in getting global leaders from China to Germany to commit major sums toward stimulating their economies ahead of the summit to combat what has become a worldwide recession.
Japan said Friday that it’s ready to lend the IMF up to $100 billion to support nations reeling from the global financial crisis. Further large donations are expected from Persian Gulf states. Some countries, like China, are said to be conditioning any additional support for the IMF on gaining greater voting power on the IMF’s governing board, which is currently dominated by the United States and European nations. But chances of that happening at the summit appeared remote.
“There is a need for urgency” to address both the rapidly deteriorating economic situation and the need for better regulation of banks, Mr. Brown said.
Britain and Europe were behind efforts to set up an early warning system that would watch for financial bubbles like the one that enveloped the housing markets in the United States, Spain and Ireland. The housing bubbles eventually burst and created the mess world leaders are trying to clean up.
The crisis erupted in the United States in August of last year, but has spread to nearly every part of the globe and nearly every financial market from mortgages and stocks to commodities and student loans.
The summit is a meeting of the Group of 20 nations plus two other European countries - Spain and the Netherlands - who came at Mr. Sarkozy’s request. The G-20 includes traditional powers such as France, Britain and Germany, as well as developing economic powers such as Russia, China, Brazil and India.
In a telling sign of the importance of these emerging economies, Chinese President Hu Jintao was seated at dinner Friday night to Mr. Bush’s left, and Brazilian President Luiz Inacio Lula da Silva sat on his right.