President Barack Obama, preparing to meet with other G20 leaders in Pittsburgh, on Saturday stressed the need for regulations to prevent another global economic crisis and German Chancellor Angela Merkel was optimistic agreement could be reached at the summit.
Financial market reform will be a central issue at the summit of leading developed and developing nations but Obama's U.S. regulation agenda has moved slowly in Congress. In his weekly radio and Internet address he sought to show other countries that his administration is serious about tackling U.S. shortcomings blamed for triggering last year's the global crisis.
As the world's largest economy, we must lead, not just by word, but by example, Obama said.
We know we still have a lot to do, in conjunction with nations around the world, to strengthen the rules governing financial markets and ensure that we never again find ourselves in the precarious situation we found ourselves in just one year ago, he said.
Merkel, in her weekly online podcast, said she was thoroughly optimistic about the two days of talks starting Thursday in Pittsburgh because the European Union would be able to speak there with one voice. She said the summit must take a step forward from the G20 gathering hosted by Britain in April.
We need to get well beyond the agreements made in London, she said. We can work toward ensuring a (financial) crisis like this is not repeated worldwide. That must be our goal.
Obama and Merkel both took aim at the bonus culture in the banking industry with the German chancellor saying bankers must not be allowed to claim bonuses for running up losses.
Obama echoed that by saying, We cannot allow the thirst for reckless schemes that produce quick profits and fat executive bonuses to override the security of our entire financial system and leave taxpayers on the hook for cleaning up the mess.
Federal Reserve sources said on Friday the U.S. central bank was near to proposing wide-ranging rules to apply to any banker able to take risks that could imperil an institution.
That would be a step forward for U.S. policymakers who have been reluctant to endorse anything like the caps or dollar limits on pay and bonuses sought by some European officials.
Obama renewed his call on Congress to approve his proposal for creating a Consumer Financial Protection Agency, which he said would set clear rules on mortgages, credit cards and lending.
Not surprisingly, lobbyists for big Wall Street banks are hard at work trying to stop reforms that would hold them accountable and they want to keep things just the way they are. But we cannot let politics as usual triumph so business as usual can reign, Obama said.
Dominique Strauss-Kahn, the managing director of the International Monetary Fund, told the Financial Times that G20 nations had to provide the political leadership that had been lacking in past efforts to cut back economic imbalances while helping to ensure growth.
We need to have rebalancing of growth and increase in consumption in the emerging markets to have enough growth in the short term, he told the newspaper. We also need to define what the long-term growth model will be.