U.S. May Face European Anger At Global Summit President Bush's call for a global summit may diffuse the concentrated wrath of Europeans — or it may just buy time for a president with only a few months left in office. Economist Robert Litan from the Brookings Institution tells host Liane Hansen a lot of people are blaming the U.S.
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U.S. May Face European Anger At Global Summit

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U.S. May Face European Anger At Global Summit

U.S. May Face European Anger At Global Summit

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Joining us now is Robert Litan, a senior fellow in the economic studies program at the Brookings Institutions. Good morning, Robert.

Mr. ROBERT LITAN (Senior Fellow, Economic Studies Program, Brookings Institution): Good morning to you.

HANSEN: The Europeans were pressuring President Bush to hold the meeting of the Group of Eight, and the president went a step further and called for a global conference. Why is that?

Mr. LITAN: Perhaps to defuse the concentrated wrath, if you will, of the Europeans. Also probably to help buy time because he only has a few months left.

HANSEN: The Europeans, as we heard, were calling for reform in the global financial markets. Do you think this will be the only item on the agenda?

Mr. LITAN: Probably, but there's a lot to cover when we're talking about the never-again agenda. A lot of countries have different views about how to fix this. As I said, a lot of people blame the United States, and so I think whatever conference that emerges - and it looks like there will be a series of them - I think the United States is going to have to absorb some venting, if you will, by a number of the other countries before they move all into an actual substantive agenda.

HANSEN: What are Europe's big concerns right now?

Mr. LITAN: Well, again, there are differences among the countries. Gordon Brown, for example, of the U.K., has called for some kind of international, global, if you will, supervisor of banks and perhaps other financial institutions, at least the top ones, the 30 largest ones. We just heard that President Sarkozy has complaints about hedge funds. I think he's joined in that by the leaders of a number other countries. Germany, for example, has been concerned for a long time about private equity funds, and there may be other concerns of different countries. I think once you have a global meeting, there'll be a long list on the agenda.

HANSEN: Are they considerably different concerns from those in the United States?

Mr. LITAN: Not all that much. I think in Congress there are concerns about a lot of these issues. I think in the United States we would add to those lists, probably, and certainly standards for mortgage origination and perhaps issues relating to securitization, namely the process by which a lot of these fancy securities got formed and eventually were at the heart of - of now the financial crisis globally.

HANSEN: In your opinion, do you think if the United States and Europe can actually cooperate, will that cooperation help alleviate the crisis?

Mr. LITAN: Well, actually, I think even without the cooperation. A number of steps have already been taken which will eventually reduce the length and the severity of the crisis, although we can't avoid a recession. I think we're already in a recession. But the focus of any future meeting is probably not going to be so much on how to get out of the current mess because already so much effort has gone into that. It's on the so-called never-again agenda. It's on fixing the system so that hopefully something like this doesn't happen.

HANSEN: Are you optimistic or pessimistic about fixing the system?

Mr. LITAN: Oh, I think we're going to fix the system, and I think without an international meeting. Congress is already hell-bent on devising a whole series of rules relating to all aspects of finance: how we originate mortgages, how we securitize assets, how financial institutions are regulated, how markets are regulated. In other words, many of the same issues that will be on the global agenda are going to be on our agenda. At a global meeting, though, I think you'll probably get some more oomph(ph) or some more angst about certain of these issues than others. But the system is going to be fixed, as I said, regardless of whether and to what degree we participate in a global meeting.

HANSEN: Robert Litan is a senior fellow at the Brookings Institution and vice president of research and policy at the Kauffman Foundation. Thank you very much.

Mr. LITAN: Thank you so much.

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