STOCKS, CURRENCIES, oil and commodities tumbled yesterday and governments from Budapest to Buenos Aires resorted to emergency action to rescue their economies from the worst financial crisis in 80 years.
The White House has set November 15th as the date for the first of a series of international crisis summits that will bring together the G20, which includes major industrial economies, plus big emerging-market countries such as China, India and Brazil.
World leaders, facing financial markets in turmoil and the possibility of global recession, will discuss ways to fix the crisis at the summit in Washington.
With US and European leaders sparring over the causes of the credit crunch and how to cure it, there is little consensus on what steps to take. The meeting may produce only an agreement to hold additional meetings. "Everybody will come with their own ideas," White House spokeswoman Dana Perino said. "Not everybody will have the same solution."
President George Bush, responding to calls from French president Nicolas Sarkozy and British prime minister Gordon Brown, invited leaders from the so-called Group of 20 industrialised and developing nations to attend the summit two weeks after the US presidential election.
Three weeks away, the summit is unlikely to do more than kick off a process toward international reforms. Europeans have been pressing for a major financial system revamp. Mr Sarkozy has called for broad changes in the way financial markets are regulated. He said yesterday that his goal was to "reform the international financial system and ensure that the current crisis won't repeat itself thanks to a better regulation".
However, Ms Perino suggested that the Bush administration was more interested in a discussion of "principles" for prudent national regulation. The Financial Services Roundtable, which represents 100 of the largest US banking, insurance and investment companies, said while it supported the idea of international regulatory guidelines for capital standards and consumer protection, the application of those principles should be left to each individual country.
Meanwhile yesterday, more governments scrambled to fix the immediate problems threatening to overwhelm their economies.
Hungary raised interest rates to defend the forint, Ukraine, Pakistan, Iceland and Belarus sought IMF help, currencies tumbled against the yen and dollar, which hit a two-year high, and US companies announced big job cuts and weaker earnings.
Major US stock indexes dropped for a second consecutive day, oil fell 7 per cent to below $68, a 16-month low, and commodities slumped on the soaring dollar and fears of a global recession.
Battered US bank Wachovia, which will be taken over by Wells Fargo, posted a $23.9 billion third-quarter loss, a record for a banking company in the crisis.
A welcome sign was lower interbank borrowing costs, with further steep falls in dollar rates indicating the recent flood of liquidity pumped into the banking system was easing money market strains. Emerging market stocks, sovereign debt and currencies were all under intense pressure. - (Reuters/Bloomberg)
