Finance officials pledge tighter regulations
WASHINGTON -- World financial leaders facing the gravest economic crisis in at least a decade are pledging tighter control of banks and other financial institutions and hoping the U.S. slump is short.
The 185-nation International Monetary Fund and the World Bank readied for weekend discussions following talks among the world's seven richest industrial countries.
The IMF, the lender of last resort for countries in trouble, is facing its own hard times. One proposal on the agenda would trim 15% of the agency's staff and sell about $11 billion in the institutions' vast gold reserves.
Overshadowing the sessions was the severe credit crisis, which could result in losses approaching $1 trillion before it is over, according to an IMF estimate released this week.
Treasury Secretary Henry Paulson assured the IMF's policy-setting panel on Saturday that the Bush administration was dealing aggressively with the U.S. slowdown, but that risks remain.
"The weak housing market, together with high energy prices and stress in financial markets, is penalizing U.S. economic growth," he said. "We must expect more bumps in the road."
The world's economic powers endorsed a plan Friday to keep closer watch over big banks, investment houses and other financial firms. These institutions have reported billions of dollars in losses from the credit crisis. The problem began with the widespread defaults on subprime mortgages in the United States, but quickly spread to other types of global investments.
Announcement of the tighter oversight came in a joint statement after talks among the Group of Seven nations — the United States, Japan, Germany, Britain, France, Italy and Canada. other types of investments around the world.
"The turmoil in global financial markets remains challenging and more protracted than we had anticipated," G-7 officials said.
"The U.S. economy has to get over the economic unrest," Japanese Finance Minister Fukushiro Nukaga told reporters. What happens in the United States, he said, will affect Asia and other countries.
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