WASHINGTON, (AP) – World leaders at an emergency economic summit are moving to sharpen detection of risky investing and regulatory weak spots, hoping to avoid future financial meltdowns like the one now threatening the global economy.
In the largest gathering of its kind here in nearly a decade, President George W. Bush and some two dozen foreign leaders were to meet Saturday behind closed doors as they prepared to adopt an action plan for more openness in financial markets and an early warning system for problems like the speculation frenzy that fed the U.S. housing bubble.
“The stakes are indeed high,” Bush said Friday. “Billions of hardworking people are counting on us to strengthen the financial system for the long term.”
Behind the urgent rhetoric, the steps taking shape were modest.
The action plan would include measures aimed at making the global financial system more accountable to investors and more transparent to regulators, diplomatic officials said.
It also would improve international monitoring of markets and bolster rules governing how companies value their assets, a current weakness seen as partly responsible for the financial crisis at hand. The officials spoke on condition of anonymity because leaders had yet to agree on their final communique.
While the emerging plan would boost oversight of fragile financial markets, it fell short of the sweeping set of tough new regulations some Europeans want.
The summit, meant to be the first in a series, has a two-pronged agenda: reviving the ailing global economy, which has pushed up unemployment and shrunk people’s savings, and exploring options for overhauling the global financial system to prevent similar financial crises in the future.
A follow-up summit is envisioned for the spring, after Barack Obama becomes president.
A new “college of supervisors,” made up of financial regulators from many nations, was among the ideas likely to be included in the leaders’ final communique issued expected at the summit’s conclusion late Saturday.
Heads of major industrialized powers, including Britain, Germany, France and Japan, are attending the summit as are developing countries such as China, India and Brazil.
As leaders descended on Washington Friday, Bush warned for a second day of the dangers — in his view — of too much government intervention. Strict new regulation of financial firms or products, such as some European leaders have advocated, would crush the global economy instead of protect it, he said.
While striking a similar note of caution, British Prime Minister Gordon Brown also underscored the need for leaders to forge agreements to safeguard against future problems. “Instead of just muddling through dealing with the crisis, we have to show how we are making the adjustments in the proper way to this global age,” Brown said.
Brown has been among the leaders pushing for a global coordination of country-by-country stimulus spending packages to combat the economic hard times that are straining millions of families and businesses.
The Bush administration, however, has been cool to the idea of another stimulus package and opposes a bailout of the teetering U.S. auto industry. Democrats are pushing for aid to Detroit automakers amid reports that the largest of them, General Motors Corp., could be forced into bankruptcy by the end of next month.
Critics blame lax oversight and failures by U.S. and other regulators to detect problems as prime reasons for the financial crisis.
The crisis, which erupted in the United States around August of last year as mortgage investments soured with the housing market’s collapse, quickly spread to other countries. Banks and other financial companies suffered huge losses and foreclosures skyrocketed. Troubles then snowballed to other areas, crimping auto and student loans and locking up lending for many consumers and businesses worldwide. The root causes of the crisis also was being discussed by the leaders.
Although Obama is staying away from this summit, he has designated high-level representatives — former Secretary of State Madeleine Albright and former Republican Rep. Jim Leach of Iowa — to meet with leaders on the sidelines.
Mexican President Felipe Calderon met Albright and Leach, and stressed that a return to protectionism would only complicate economic recovery efforts, according to the Mexican leader’s office. Albright and Leach also saw the leaders of Argentina and South Korea on Friday and had talks scheduled with lower-level representatives from other nations Saturday.
Europeans had hoped the summit would produce stronger measures to close loopholes that allow some financial institutions to evade regulation. They also called for government supervision for all major financial players, including credit ratings agencies or funds carrying high amounts of debt.