< Finance Chiefs Meet On Global Economic Crisis

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Heard on All Things Considered

October 11, 2008 - ANDREA SEABROOK, host:

From NPR News, this is All Things Considered. I'm Andrea Seabrook. Today, the day after the worst week in Wall Street history, President Bush met at the White House with financial leaders from the world's biggest economies. Their aim, cool the financial fever that's causing the meltdown. After the meeting, President Bush expressed confidence.

President GEORGE W. BUSH: The leaders gathered in Washington this weekend are all working toward the same goals. We will stand together in addressing this threat to our prosperity. We will do what it takes to resolve this crisis. And the world's economy will emerge stronger as a result.

SEABROOK: President Bush speaking of the world's financial leaders who are in Washington for the fall meetings of The World Bank and The International Monetary Fund. NPR's John Ydstie is here now. John, last night, these finance ministers and central bankers issued what they called an action plan. Did it meet expectations?

JOHN YDSTIE: Well, there were a lot of Wall Street traders who had hoped that the G7 would adopt the British plan for governments to back up all interbank lending, which they believed would make banks more willing to lend and ease the credit crunch. That didn't happen.

What the G7 did agree on was a five-point framework that U.S. Treasury Secretary Paulson called an action plan. Each country pledged to take the necessary steps to unfreeze credit, to stand behind their major financial institutions, to make sure their deposit insurance systems were robust, to take action to restart their mortgage markets, and to ensure financial institutions were able to raise capital, which they need to do to boost lending.

SEABROOK: OK, five-point plan, but haven't these countries been trying to do all those things already? I mean, what about the specifics on how to do these things?

YDSTIE: Well, they have been attempting this, and there were no specifics yesterday. That's going to be left to each country. And that was a disappointment, I think, for a lot of people, but at a news conference after the G7 meeting, Secretary Paulson took the opportunity to provide some details on how the United States was going to deal with this last issue of boosting the capital in banks. He confirmed that the Treasury is working to come up with a standardized plan for the U.S. government to buy stock in banks using some of the $700 billion that Congress appropriated for the financial rescue.

SEABROOK: So, does that mean the government is going to be taking control of banks, nationalizing banks?

YDSTIE: You know, we don't know the details, but it doesn't appear so. Paulson said that the government would buy shares like any other investor and suggested it would not become involved in management of the banks. But as I said, there are details to come.

SEABROOK: Hmm. The IMF and World Bank are primarily concerned with emerging markets, developing countries. Are they being affected by this?

YDSTIE: Yes, they are. The head of the IMF, Dominique Strauss-Kahn, said today that the crisis is now affecting emerging markets, though not as much as developed countries so far. But the IMF is forecasting a global slowdown in growth for the next year, including in the emerging economies. That's not surprising, of course, since they sell much of what they produce to the developed world, and the IMF says the developed world will be in recession through much of next year.

SEABROOK: Hmm. John, so the bottom line, can this action plan, as it's called, stop the madness on Wall Street?

YDSTIE: Well, today was the first day this week that the stock market didn't fall. Of course, that's because the stock markets weren't open.

(Soundbite of laughter)

YDSTIE: Maybe there's an idea, keep them closed. Seriously, I don't think anything that happened this weekend is going to change the basic mood on Wall Street. Most of the ideas will take time to implement. Many of them have been around for a while. So, I think the markets will be nervous as they open Monday, waiting to see if the deal for Morgan Stanley to get a $9 billion injection of capital from a Japanese bank goes through. If that happens, on Tuesday, it could be positive for the market. If it doesn't happen, it could be negative.

SEABROOK: Up in the air. Thanks again. NPR's economics correspondent, John Ydstie, thanks.

YDSTIE: You're welcome.

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