- The Washington Times - Thursday, November 13, 2008

President Bush on Thursday vigorously defended free market principles in laying out his agenda for the gathering of world leaders at this weekend’s economic summit, and said the world is facing “a decisive moment for the global economy.”

“The record is unmistakable: If you seek economic growth, if you seek opportunity, if you seek social justice and human dignity, the free market system is the way to go. And it would be a terrible mistake to allow a few months of crisis to undermine 60 years of success,” Mr. Bush said during a speech in New York to the Manhattan Institute.

Leaders from Russia to Brazil and Argentina to France in recent months have blamed America for causing the global economic crisis.

Mr. Bush traced the problem to the influx of capital into the U.S. from countries such as China, which then built up a housing bubble through easy lending that fueled the furious rise of risky mortgage-backed securities market.

When housing prices started to go down, the securities lost value, triggering a massive sell-off and devaluation of numerous institutions that has rippled around the world.

“Some blame the crisis on insufficient regulation of the American mortgage market. But many European countries had much more extensive regulations and still experienced problems almost identical to our own,” the president said.

Mr. Bush’s five specific reforms include making securities more transparent through better accounting rules, moving credit default swaps and other complex derivative products to a “centralized clearinghouse,” cutting down on market manipulation, better coordination between world financial authorities, and reforming global institutions such as the World Bank and International Monetary Fund.

The president’s position on the IMF, in particular, is in conflict with ideas from Europe, where French President Nicolas Sarkozy has called for the IMF to receive more money which they can disburse to struggling economies.

Mr. Bush, however, said that “dynamic developing nations” such as China and India should have greater voting power and more representation on executive boards of the IMF and World Bank, and that both institutions should be made “more transparent, accountable, and effective.”

And in the case of cracking down on manipulation, Mr. Bush said that each country should do that unilaterally, while some favor a more onerous and powerful global regulator.

Mr. Bush admitted that “this crisis included failures by lenders and borrowers, by financial firms, by governments and independent regulators.”

“But the crisis was not a failure of the free market system,” he said. “And the answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market principles that have delivered prosperity and hope to people all across the globe.”

Mr. Bush also claimed that the U.S. and other countries around the world “are taking the right steps to get through the crisis,” in another attempt to slow calls from Europe and elsewhere for a dramatic overhaul of the global financial architecture.

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