World leaders discuss financial crisis

Over 20 leaders meet in Washington to approve measures on more accountable global economy.

Bush financial summit 248 88 ap (photo credit: AP)
Bush financial summit 248 88 ap
(photo credit: AP)
Nearly two dozen world leaders assembled in Washington on Friday in the largest gathering of its kind here in nearly a decade. The leaders were on track to approve measures to make the world financial system more accountable to investors and more transparent to regulators, diplomatic sources said. To do so, the leaders were expected to endorse more effective accounting rules governing how companies value their assets, a weakness seen as partly responsible for the current financial crisis. The sources, speaking on condition of anonymity because leaders had yet to give formal approval to the draft communique, said the emerging agreement also calls for steps to sharpen the world's eyes watching for the kind of dangerous investing that led to the present chaos. A new early warning system would look for signs of burgeoning problems like those in the US housing market and related overuse of mortgage-backed securities. On Friday, the heads of the International Monetary Fund, the world's financial firefighter, and the Financial Stability Forum, a group that includes central banks and major financial regulators, said they would cooperate on "early warning exercises" to detect vulnerabilities. Also, a new "college of supervisors" would gather global regulators tasked with scrutinizing the world's largest financial institutions together to compare notes as they seek to spot excessive risk-taking. Altogether, the US preference for boosting oversight of shaky financial markets seemed to be holding sway over Europe's desire for tougher internationally enforced regulation. "Billions of hardworking people are counting on us," US President George W. Bush said on a night when urgent motorcades swept presidents and prime ministers through a dark Washington mist to the White House. A second summit is envisioned in early spring, after Barack Obama becomes president. The first meeting, called by Bush, falls in a period of transition that inevitably leaves unclear what actions the US is ready to take in the months ahead. The president-elect stayed away from the meeting, but designated former Secretary of State Madeleine Albright and former Rep. Jim Leach to represent him in meetings with leaders on the sidelines. They saw the leaders of Argentina, Mexico and South Korea on Friday and had talks scheduled with lower-level representatives from several other nations both Friday and Saturday. Leaders from Britain, France, Germany, Russia, China and India were among those in Washington. The summit, meant to be the first in a series, has a two-pronged agenda: Discuss what might still need to be done to turn the world's economies back from the edge of disaster and explore ways to revamp the global financial system's architecture to prevent similar meltdowns in the future. New reminders of the urgency facing the leaders came even as they poured toward the US capital city from around the globe. The government reported that sales by American retailers fell by a record amount last month. Federal Reserve Chairman Ben Bernanke hinted at another interest rate cut to encourage consumers. The Dow Jones industrials dropped 338 points. Fearing another Wall Street plunge if the summit produces little, the White House has been lowering expectations as fast as other nations have been raising them. "This problem did not develop overnight and it will not be solved overnight," Bush said in a dinner toast. The agreement lacks big, splashy elements, such as the establishment of a single global regulator or strict new regulation of financial firms or products.