Yesterday, President Obama and U.K. Prime Minister Brown met to discuss, among other things, the “special relationship” between the U.S. and U.K., the need to coordinate economic policy, and likely themes for the upcoming G-20 summit in London in April. Elaborating on the “special relationship,” Prime Minister Brown stated: “I think it’s a partnership of purpose that is driven forward now by the need for us all to work together in unity to deal with the world economic problems.” The two leaders agreed to the need for a “deep regulatory change” and the need “for proper supervision of shadow banking systems, of areas where there [were] bank practices that were unacceptable, where remuneration policies got out of hand and weren’t based on long-term success, but on short-term deals.”
President Obama reiterated several of the problems of the banking system that Prime Minister Brown has mentioned, including “lax regulation, massive over-leverage, huge systemic risks taken by unregulated institutions, as well as regulated institutions.” President Obama also addressed the issue of global coordination “so that all the G20 countries, all the major countries around the world ... are stimulating their economies” and making “sure that there are a common set of principles ... so that problems that exist in emerging markets like Hungary or the Ukraine don't have these enormous ripple effects that wash back onto our shores.” Prime Minister Brown added,
“because a bad bank anywhere can affect good banks everywhere, … we've got to root out the problems that exist in other parts of the world, as well, set principles with the banking system for the future, and make sure that the banks subscribe to lending agreements where they actually increase the lending that is available to citizens in every country.”
Looking toward the G-20 summit, President Obama encouraged trade without “protectionist barriers” and Prime Minister Brown mentioned “the possibility of all the different countries of the world coming together to agree to expansion in the economy that is necessary to both restore confidence and to give people jobs and growth and prosperity for the future.” Today, channeling Franklin Roosevelt, U.K. Prime Minister Brown addressed both houses of Congress and introduced his “global new deal.” Prime Minister Brown listed three components to his plan:
- To agree to “rules and standards for accountability, transparency, and reward that will mean an end to the excesses and will apply to every bank, everywhere, and all the time” at the G20 Summit in London in April.
- To “work together for the worldwide reduction of interest rates and a scale of stimulus that is equal to the depth of the recession around the world and to the dimensions of recovery.”
- To “renew our international economic cooperation, help emerging markets rebuild their banks, let us sign a world trade agreement to expand commerce, let us work together also for a low carbon recovery.”