Prepared Statement by Treas Sec Geithner at the G-20 Finance Ministers and Central Bank Governors Meeting

Prepared Statement by Treasury Secretary Tim Geithner at the G-20 Finance Ministers and Central Bank Governors Meeting
March 14, 2009
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Horsham, UK -- I am very pleased to be in the UK for the G-20 Finance Ministers and Central Bank Governors meeting. I want to compliment Chancellor Darling for his leadership and the excellent work of his staff in preparing for this meeting.

We met to prepare a comprehensive set of recommendations for the meeting of the heads of state early next month. This is a global crisis and it requires a coordinated global response. We have a strong consensus on the need for both recovery and reform so that we never face a crisis like this again.

An effective response to restore global growth requires several things. It requires a sustained commitment to macroeconomic stimulus and pro-growth policies on a scale commensurate with the severity of the problem. It requires aggressive actions to fix our financial systems and get credit flowing again. It requires substantial support from the international financial institutions targeted to those emerging markets and developing economies most affected by the crisis. This means a significant increase in resources – deployed more quickly – to provide financing in support of counter-cyclical fiscal policies, bank repair and recapitalization to increase lending, trade finance, and support to the poorest countries that are most impacted by the crisis.

Alongside these actions must come a clear commitment, when recovery is firmly established, to return to fiscal sustainability and to unwind the extraordinary policy actions needed to restore economic growth and solve the financial crisis.

You are seeing the world move together at a speed and on a scale without precedent in modern times. All the major economies are putting in place substantial fiscal packages. The stronger the response, the quicker recovery will come. That is why the United States has passed the largest, most comprehensive recovery package in decades.

We are each moving preemptively to get ahead of the intensifying pressures that you see across national financial systems and we released today a common framework for restoring the flow of credit.

In the United States, we have launched a new program to help revive the credit markets. We have initiated a forward-looking assessment of the potential capital needs of our major financial institutions, and outlined the terms of the capital assistance program that will provide a backstop for those institutions that need additional capital. We will soon outline our program to use market mechanisms to help clean up the legacy assets on bank balance sheets and bring in private capital alongside government financing to help restart markets for these assets.

As President Obama has said, we will bring the full force of the federal government to ensure that the major banks are able to meet their commitments so that they continue to play critical roles in market functioning and in providing credit to households and businesses.

The G-20 has agreed to the need for mobilizing more resources for the international financial institutions to address the risks posed by the pull back of capital flows and the fall in external demand. The G-20 supports our proposal for a substantial increase to emergency IMF resources through a major enlargement of the New Arrangements to Borrow (NAB) and expansion of its membership. We have asked the World Bank and other Multilateral Development Banks to leverage existing resources by flexible use of their balance sheets to help meet financing needs.

Now turning to reform. The G-20 has agreed on a common framework of concrete changes to the international financial architecture. Risk does not respect national borders. We must establish a much stronger form of oversight and clear rules of the game, more evenly enforced across the international financial system. This will require comprehensive changes both at the national and international levels. The United States will soon be releasing a comprehensive framework of regulatory reform. Our strategy underscores our commitment to encourage a race to the top rather than a race to the bottom; a global move to higher standards.

We have committed to broad principles to guide the reform of the financial system:

First, all institutions that are important to the stability of the financial system should come within a much stronger framework of oversight, with clearer rules of the game that are enforced more evenly and consistently across countries.

Second, all markets, including the derivatives markets, need to be subject to standards for stability and a framework for disclosure.

Third, looking forward we need to provide much stronger cushions of stability to ensure that the framework of capital requirements and accounting standards dampens rather than amplifies future financial crises.

Fourth, we must promote financial market integrity. We welcome Switzerland's announcement to increase information sharing as part of the global effort to end tax evasion.

Alongside this framework, we have expanded membership of the Financial Stability Forum, and we should elevate its role in the international system so that the global economy has – alongside the original Bretton Woods institutions of the IMF, the World Bank and the WTO – a strong institution able to lead these critical efforts to a more robust framework of oversight and standards for the global financial system.

We are committed to accelerating the timetable of reform of the broader governance structure of the international financial institutions to increase the role of developing countries in these institutions.

Let me just conclude by saying that we have a very broad basis of consensus globally on the need to act aggressively to restore growth to the global economy and a commitment to move together to address the evolving crisis.

U.S. workers are among the most productive in the world, but U.S. companies need open and growing markets. As President Obama stressed this week, a healthy United States requires a healthy global economy. Our recovery will be stronger if the world is stronger.

I am very pleased by the progress achieved today on both recovery and reform.