U.S. calls for foreign governments to boost the total commitment to the International Monetary Fund by $500 billion to assure economic aid for poor nations.
President Obama called for greater efforts by foreign governments to stimulate their economies in the fight against the global recession. But he also pledged an equal commitment to toughen regulation of financial institutions, a top priority in Europe elsewhere.
Elaborating on the president's comments, Treasury Secretary Timothy Geithner said developed nations should increase their financial commitment to the International Monetary Fund by a combined total of $500 billion to assure that it has enough money to help poorer countries hard hit by the economic crisis.
Both the president's call Geithner's pitch for an backstopping the IMF were part of the Obama administration's effort to achieve what it hoped would be a more coordinated response to the economic meltdown worldwide.
"We can do a really good job here at home, with a whole host of policies, but if you continue to see deterioration in the global economy, that's going to set us back," Obama said...
With a meeting financial ministers from leading economic powers set for this weekend, and Obama and other major world leaders heading to an economic summit next month, the administration is stepping up pressure on foreign governments to pour money into major stimulus plans, as the $787-billion package the U.S. enacted last month.
But many of the Group of 20 leading and developing nations, known as the G-20, are resisting. That's partly because of widespread resentment over the U.S. role in creating the worldwide financial crisis -- and resentment over being asked to spend their money to combat.
Also, although Americans are relatively comfortable with growing deficits, the European Union has rules against too much red ink, and many countries believe they already have done enough to stimulate their economies. Instead, they are more focused on tightening financial regulations to prevent a repeat of the crisis.
Obama and Geithner emphasized Wednesday that regulatory reform was a twin goal of the April 2 summit of G-20 leaders.
"It's time now for us to move together and to begin to act to put in place a stronger framework of reforms," Geithner said after a White House meeting with Obama.
Although Congress quickly enacted stimulus legislation last month, studying the regulatory system and proposing a major overhaul is a much more complicated process. Obama said he has been in discussion with congressional leaders about revamping financial regulations, and the administration has said it would unveil proposals next month.
Among the suggestions is a regulator to watch the entire financial system for major risks such as the collapse of the housing market. The Federal Reserve is the leading candidate for such a job.
Lawmakers have begun holding hearings on legislation to strengthen financial regulations. On Wednesday, for example, Mary L. Schapiro, the new chairwoman of the Securities and Exchange Commission, told a House Appropriations subcommittee her agency needed more money to hire additional staff members and upgrade the agency's technology to better protect investors.
"What I think we really need is more boots on the ground," she said, noting that the agency has 3,600 employees to monitor more than 30,000 regulated entities, such as investment advisors and mutual funds.
The has been sharply criticized for failing to prevent the risky investments that led to the collapse of major financial institutions and for failing to halt the $50-billion Ponzi scheme allegedly operated by New York investor B. Madoff.
Geithner, briefing reporters ahead of the meeting of G-20 finance ministers in London, said the United States would urge developed nations to beef up the International Monetary Fund's ability to lend to troubled governments by $500 billion.
He described it as an "emergency reserve fund" for the which monitors the financial health of governments around the world.
Generally, the United States provides about 20% of the international group's funds, so the U.S. share would be roughly $100 billion, Geithner said. But because the funds are in effect used as capital, not spent, the increase would not affect the federal budget or the federal deficit -- so no additional taxpayer funds would be needed.
"What we're proposing is that we move quickly to reach agreement globally on a . . . much, much larger capacity for the IMF to deal with future crises," Geithner said. "We want it to be large enough to be effective and credible in response to a crisis of this magnitude. It's a very dramatic expansion."
Just as with global stimulus, Geithner said the move was needed to address the deepening worldwide recession. The World this week that the global economy would contract this year for the first time since World War II.
"What we're seeing around the world right now is really without precedent," he said. "If we don't get the world moving with us, we face the prospect of a deeper, longer-lasting recession in the United States."
The U.S. stimulus effort would result in spending equivalent to 2% of the country's annual total economic output, a standard set by the IMF.
Geithner was optimistic that other nations would do more -- particularly to extend stimulus efforts into 2010 -- and said there was no evidence of a rift between U.S. and European objectives.
"The world really is moving together now," Geithner said. "You're seeing quite substantial, broad-based stimulus programs, but the important thing is that they are sustained over the course of the recession, [that] you don't see people move prematurely to pull back that stimulus. That will be the message I bring."