Treasury chief Timothy Geithner between Dominique Strauss-Kahn of the I.M.F. and Christine Lagarde, French finance minister.
By SEWELL CHAN
Published: April 23, 2010
WASHINGTON — Proposals to establish a global tax on banks and charge them for the cost of government bailouts divided representatives of the Group of 20 countries during a summit meeting here on Friday.
The perilous fiscal condition of Greece and other countries in Europe, and the need for the world’s big economies to coordinate changes in financial regulation, were the other major topics in the daylong meetings of Group of 20 finance ministers and central bank governors.
“The global recovery has progressed better than previously anticipated, largely due to the G-20’s unprecedented and concerted policy effort,” the officials said in a joint communiqué.
The International Monetary Fund endorsed a proposal this week that would establish a tax on bank profits and on salaries paid to bank executives. Canada, whose banking system withstood the crisis, has led the opposition to the idea, while the Obama administration, which has called for a $90 billion levy to be collected over 10 years from banks that received bailout money, tried to marshal support for it.
“There was not agreement on a global bank tax,” Jim Flaherty, the Canadian finance minister, said at a news conference after the meetings. “Some countries are in favor of that. Some countries quite clearly are not. It depends whether a country has had to use taxpayers’ dollars to bail out banks, for the most part.”
Treasury Secretary Timothy F. Geithner defended the idea. “We’re trying to establish the basic principle that where governments are exposed to risk in putting out financial fires like this, that taxpayers don’t bear the costs of paying for those actions,” he said, adding, “That is a simple, fair, basic imperative.”
Mr. Geithner said there was “significant support” for the bank tax, but allowed that he understood a “certain lack of enthusiasm” from Canada.
He added, “We’re going to do what’s necessary for the U.S., what’s in our interest, and I think the world’s going to want to watch what we do. And I suspect that’ll provide a basis for other actions across some of the other economies.”
The cautiously worded joint communiqué acknowledged, but sidestepped, the bank tax proposals. It called for further I.M.F. study “on options to ensure domestic financial institutions bear the burden of any extraordinary government interventions where they occur, address their excessive risk-taking and help promote a level playing field, taking into consideration individual countries’ circumstances.”
John Lipsky, the deputy managing director of the I.M.F., said on Friday that the bank tax, if calculated based on the risk banks posed to the financial system, “could help to discourage financial institutions from taking on excessive risk.” Such a fee would also “address the public policy concern that financial institutions are able to privatize gains but socialize costs arising in the financial sector,” he said.
Mr. Lipsky’s boss, Dominique Strauss-Kahn, the top I.M.F. official, caused rumblings on Friday when he suggested that some countries were moving too quickly on reform. He said the Obama administration’s plan “comes too soon” given the need to coordinate responses across countries.
“I read that and I thought, really?” Mr. Geithner said in response. “My sense is that it’s been 15 months — or more than a year — since we started this process in the United States. We’re not moving with excessive haste.”
Mr. Geithner acknowledged that one of the biggest reform elements — forcing banks to hold more capital as a buffer against economic disruptions — was partly beyond the scope of the legislation being debated by Congress. The Basel Committee on Banking Supervision, a global regulatory body, is coordinating discussions around capital requirements in the hope of announcing new standards by the end of this year.
“The core issue there is the quality and quantity of capital and setting standards for that, and also an appropriate cap on leverage,” said Mr. Flaherty. “We agreed that that’s a key element.”
The Group of 20 officials offered few details on the Greek debt crisis, except to support the aid plans of the European Union and the I.M.F. Mr. Flaherty said of the Greeks: “They have undermined the confidence of the markets and it is essential that some steps be taken, that the Greek government work with the I.M.F., and the European Commission of course, to identify a credible, multiyear economic and fiscal program.”
Although India and Brazil this week joined calls by the United States for China to allow the value of its currency, the renminbi, to appreciate, the Group of 20 officials said the topic did not come up in their meetings.
Yoon Jeung-Hyun, the South Korean finance minister who coordinated the meetings, said “there were no specific discussions” of either the renminbi, also known as the yuan, or the euro, which has recently fallen in value.
Even as problems in Europe preoccupied the leaders, officials reported positive developments in some poorer parts of the world.
The I.M.F. projected on Friday that economic output in sub-Saharan Africa would expand by 4.75 percent this year and 5.75 percent next year, up from 2 percent last year.
“The economic slowdown in sub-Saharan Africa looks set to be mercifully brief,” said Antoinette Monsio Sayeh, director of the fund’s African department, adding that “the slowdown has nonetheless entailed considerable social dislocation and suffering.”
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