Davos: Government regulators from the US
and Europe laid out their financial reform plans on Saturday before a sceptical
banking industry, asking financiers for input but adamant that change was
coming with or without their support.
Emerging from the two-hour meeting as its
unofficial spokesman, US Representative Barney Frank made it clear that
governments were now calling the shots after spending billions to bail out the
Top bankers, by contrast, who came into
this week's World Economic Forum buoyed by signs of economic recovery, left
somewhat subdued even as they called the closed-door meeting constructive.
"No one got up and said, 'Don't
regulate us,'" said Frank, a Massachusetts Democrat who heads the US House
Financial Services Committee. "It would have been a waste of their time if
The meeting comes after days of tension at
this Swiss Alpine resort over government plans for stricter controls on the
financial industry to limit speculation and avoid a repeat of the 2008 meltdown
that plunged the world into recession. Bankers have protested, saying the U.S.
countries risk choking off a gradual economic recovery with regulation they see
The event was not on the forum's official
agenda, but quickly became the most significant development of the day.
"We are determined to do strong,
sensible regulation," Frank said, rejecting any notion that President
Barack Obama's administration could sink the economy again with too many new
controls on the banking industry.
"That's nonsense," Frank told
reporters. "What we're trying globally to recover from is a total lack of
On the government side, those at the
meeting included Lawrence H. Summers, Obama's top economic adviser, British
treasury chief Alistair Darling, French Finance Minister Christine Lagarde and
Jean-Claude Trichet, president of the European Central Bank, which oversees the
16-nation euro zone.
Bankers attending the private talks
included Josef Ackermann, chief executive of Deutsche Bank AG, Bank of America
Corp. CEO Brian Moynihan and JPMorgan Chase & Co. Chairman Jacob Frenkel.
"It was the most constructive dialogue
I've seen between policymakers and industry officials and hopefully that's a
base people can build from," said Duncan Niederauer, CEO of stock exchange
operator NYSE Euronext Inc. "It was the first time I've seen both sides go
beyond the rhetoric. There were practical suggestions being discussed."
The banks were asked for their input, Frank
said, adding that he believed they got the message that tighter controls were
"Frankly it doesn't matter if they did
or didn't," Frank said. "They aren't in charge of this."
Frank said the most important element of
the meeting was coordinating and better understanding the various approaches
that governments are taking to stabilize and prevent excessive risks in their
The aim was not to push for a global
financial governing system, Frank said, saying each country could deal with the
crisis on its own terms.
"A large part of the discussion was on
the regulators, to talk about how we can coordinate so we don't create
opportunities for (banks) to move from one place to another to escape
regulation," he said, adding that some of the strongest concerns over U.S.
developments have come from international regulators.
Frank earlier told The Associated Press that
some countries "got used to the U.S. being the least regulated and they
almost resent the fact we are going ahead with regulations, that we are taking
the lead." He declined to say which national regulators he was referring
No one at the Saturday meeting elaborated
on any concrete proposals or agreements that were discussed. The head of Britain
Financial Services Authority said the banks didn't ask for anything at the
talks. "It was not a negotiation or a debate," Adair Turner said.
Frank and Turner later held one-on-one
Ackermann of Deutsche Bank called it an
"excellent, useful" meeting, while Joaquin Almunia, the European
Union's competition commissioner, said it "was not the place to make
"It was constructive. Not conclusive,
but constructive," Almunia said.
Moynihan of Bank of America and Frenkel of
JPMorgan Chase declined to comment.
Dominique Strauss-Kahn, the International
Monetary Fund chief, said financial sector reforms should be bold but handled
in close cooperation so that no countries suffer as a result.
"My fear is that we may ... forget one
of the key lessons of the crisis, which is coordination," he said at a
separate panel after the meeting ended.Bureau Report
First Published: Saturday, January 30, 2010, 18:37