Wednesday, April 16, 2008

World's Central Bankers Address Credit Crisis at G-7 Meeting

by Nancy Osborne, COO of ERATE


Heads of Finance from Canada, France, Germany, Italy, Japan, the United Kingdom and the Unites States all met this week in Washington. The meeting came a day after Europe's Central Bank President issued a warning that the crisis in the financial markets may develop into a broader economic dilemma. But the so called G-7 finance ministers found little common ground upon which they could agree in dealing with the crisis as each country maintains differing viewpoints on the level of responsiveness required to combat the problem. Discussions involving strengthening the regulatory environment in which the financial industry operates failed to address the pressing need to mitigate the current market crisis. While implementing more stringent regulations would certainly help prevent the recurrence of a similar crisis again in the future, agreement must be reached now to minimize the damage from the existing crisis before re-focusing on the future.

Unfortunately a joint, coordinated level of cooperation appears unlikely as each of the G-7 nations is facing different economic problems and a one size fits all approach will not work. In the United States, the economy is slowing rapidly and the threat of recession is looming, while in Europe inflation seems to be the overriding concern as they are facing the worst rate of inflation in over 15 years. Given this backdrop, it is unlikely that coordinated monetary and fiscal policies could be effectively applied. However looking toward the future, agreement could be reached on issues of improving the level of multi-national cooperation in both monitoring and regulating the financial markets. Agreement may also be reached in implementing new levels of financial transparency along with the disclosure of losses and raising the over all capital requirements. Steps which could be taken jointly now by the central banks, include lending to foreign banks as well as following the path of the U.S. Fed in lending shorter term government securities and acquiring mortgage-backed assets. ERATE is an excellent source to find the lowest mortgage rates in your state for nearly all loan programs.

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