US President Barack Obama will pledge US action on financial regulatory reform at the G20 summit in Pittsburgh, Pennsylvania, and underscore the need for global coordination on the matter, a senior aide said on Wednesday.
“It is urgent,” Michael Froman, Obama’s top negotiator for next week’s G20 gathering, told reporters.
He said there must be “a consistent approach to regulation across jurisdictions” to avoid a “race to the bottom” in which financial players flock toward countries with more lenient oversight.
Obama used a high-profile speech on Wall Street on Monday to try to breathe new life into his proposals to fix regulatory gaps blamed for the market panic that brought the financial system to the brink of collapse.
The speech coincided with the anniversary of the failure of Lehman Brothers, which triggered the worldwide crisis.
Froman, the White House deputy national security adviser for international economic affairs, also said that the G20 countries would discuss ways to seek more balanced global economic growth.
Private economists say that an imbalance between fast-growing countries such as China that have high savings rates and the US, with its high rate of borrowing and consumption, helped to set the stage for the crisis. Much of China’s excess capital was invested in US, bringing down interest rates and helping to fuel a housing bubble that eventually burst.
“We hope to reach an agreement with the rest of the G20 on a framework for balanced and sustainable growth, a set of policy, parameters and process for agreeing on how to avoid the sort of imbalances that contributed to this crisis,” Froman said.
Froman said discussions on how to achieve more balanced growth and processes for ensuring accountability would continue until the eve of the summit next Thursday and Friday.
Some of Obama’s counterparts in the G20 blame the US for the global recession that followed and worry that the effort to strengthen the US regulatory system has moved too slowly.
Obama’s regulatory package hit resistance in Congress after being overshadowed by the health care debate but the White House says the president is committed to getting it back on track.
“I think he’ll be in a very strong position there to continue to push the regulatory agenda,” Froman said.
“He goes to Pittsburgh being able to say we’re serious about these issues, we’re taking action, we’re prepared to lead by example,” Froman said, listing the key issues for the summit as economic stimulus, funding for the IMF and regulatory reform.
Froman said the G20 would seek to highlight stabilization in the economy since the last summit in April but also pledge to keep stimulus measures in place to keep a recovery on track.
“Pittsburgh is not intended to be a victory lap. We will be underscoring the need to remain vigilant to avoid a premature withdrawal of stimulus,” he said.
French President Nicolas Sarkozy is pushing for caps on huge bank bonuses that critics say encourage excessive risk-taking by financial players.
But the US opposes that idea and says the issue of risk-taking and bonuses can be addressed in other ways, such as requiring transparency in compensation, improving corporate governance and encouraging pay structures that better align compensation with performance.
“The president has been pretty clear that he supports a robust approach to executive compensation, but has been reluctant to set individual compensation levels,” Froman said.
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