G20 Gets Ready To Deliberate Global Financial Sector Regulatory Reform

Image by Downing Street via Flickr

Ok...how weird is it that there is a draft statement available before the leaders have met? From Reuters: Draft Communique for G20 Summit. Anyway, never mind. It's inadequate. So let's hope they go back to the drawing board. I'm not commenting on that tonight - I'm going to wait until they realize they must have a concrete job plan for their respective peoples.

Tonight, I'm commenting on financial regulation that's being considered. And specifically, I want to refer to this informative piece from Bloomberg: G-20 Targets Hedge Funds as Leaders Near Consensus

Now, all of this article is interesting....but let's look at some things in particular...

"“Having the U.S. and Chinese on board makes it a whole lot more likely” that an international framework will eventually emerge, says Harvard University’s Kenneth Rogoff, former chief economist of the International Monetary Fund.

Rogoff says that “it seems virtually certain that four to five years from now, the world will have either a global financial regulator or, more likely, a treaty on global financial regulation with a secretariat, akin to the World Trade Organization.” Still, he adds, “nothing is going to happen quickly.”"

See that? "treaty on global financial regulation..." That was on my wish list. See post: My Wish List - The New Global Financial Architecture. A single regulator is not realistic. A treaty is very realistic.

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"Geithner suggests empowering the Financial Stability Forum, a group of international market regulators, to “play a more effective role” alongside the IMF and the World Bank in promoting and monitoring new international regulations."

Great...except, guess who is in charge of the Financial Stability Forum now? A former Goldman Sachs exec. Anyone shocked?

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"The U.S., which has long expected other nations to follow its lead on regulations, may now have to yield to more cooperation, says former Federal Reserve Chairman Paul Volcker.

“The U.S. is no longer in a position to dictate that the world does it according to the way we’ve done it,” Volcker, head of Obama’s Economic Recovery Advisory Board, told a March 6 conference at New York University."

And here's why I think so highly of Volcker - he lives in the real world.

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"The call for greater regulation unites China, possessor of the most vibrant economy in the developing world, and the U.S., possessor of the world’s largest economy. China’s central bank governor, Zhou Xiaochuan, challenged the West to fix flaws in financial supervision on March 26, the same day U.S. Treasury Secretary Timothy Geithner outlined a broad initiative designed to do just that. "

"“China has to be listened to,” says Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “What they are trying to do is exert maximum influence on the design of the new global financial architecture.” "

Aha....here's the reality. I think I've said several times to watch China....

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"A new collaborative strategy was evident in a working paper released on March 27 by the Canadian government on behalf of the G-20, which comprises 19 developed and emerging economies plus the European Union and represents 85 percent of the world economy. "

Stop the presses. Does this mean that Canada is drafting this document! All my wishes are coming true. I asked for Canada to take a leadership role in this from the very beginning.

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Pretty interesting developments...can't wait to see what they end up with.