That was how one economist characterized the G-7 group of finance ministers' stance toward the U.S. Treasury Department's proposed $700 billion intervention to stabilize the financial system.
In a conference call statement, the G-7 - - Germany, the United Kingdom, France, Japan, Italy, Canada, along with the U.S. - - said, "We strongly welcome the extraordinary actions taken by the United States to enhance the stability of financial markets and address credit concerns, especially through its plan to implement a program to remove illiquid assets that are destabilizing financial institutions," The Wall Street Journal reported Monday(subscription required.)
However, none of the other six G-7 members will adopt a program similar to the U.S.'s, German Finance Minister Peer Steinbrueck told reporters in Berlin after the call, Bloomberg News reported Monday.
Economist Peter Dawson told BloggingStocks Monday the G-7's stance is half-hearted, in his interpretation. "In its general statement, the G-7 is on-board with the [U.S] Treasury's program but [German Finance Minister Peer] Steinbrueck's comments are disappointing. Steinbrueck, or another G-7 representative should have followed up with 'and we stand ready to assist the United States and other nations with fiscal measures to support the above goals, if needed, etc.,' " Dawson said. "Right now, the G-7's tone is 'go forth U.S., but we're not getting in the pool right now, the water's too cold.' Given the G-7's complicity in causing the problem and their systemic interest, a more-engaged statement should have been issued regarding fiscal policy options."
Cites AIG's 'interconnectedness'
For example, Dawson said the G-7's corporate involvement in American International Group's (NYSE: AIG) is evidence item 'A' for stronger G-7 involvement. "G-7 companies, banks, and institutional investors benefited from AIG's credit default swaps and related products, and would be hurt by a systemic failure. Since they are parties to the problem, they should also bear some of the costs of the reforms and bailout," Dawson said. "But right now their stance is 'Go ahead U.S. We back your spending your money, but not ours.' That's an inadequate response from our G-7 associates."
Ultimately, Dawson said the west will see greater, direct fiscal involvement from the G-7, due to the bail-out's enormous cost. "Buying our bonds from the new debt we'll issue will not be enough," Dawson said. "The G-7, particularly European members, will have to take measures to remove illiquid or bad assets that are destabilizing the financial system, as well. The U.S. can not and should be expected to bear the costs of this intervention alone."
Economic Analysis: Economist Dawson makes the case that the financial crisis is not a U.S.-exclusive problem, but international in scope. Still, for now, Europe sees the United States as committing a majority of the financial sins, and is hesitant to expend G-7 funds. That stance may change, if international pressure grows and/or if the bail-out cost increases above already unprecedented levels.
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Reader Comments (Page 1 of 1)
9-22-2008 @ 8:22PM
NoInform8tion said...
Yeah I thought their comment was kind of strange. I sort of thought who asked your opinion? LOL. So if they don't bail themselves out I guess they'll go down as we rise. But I guess that's sort of isolationist like, but well what can you do? We're already borrowing for our bail outs we certainly can't afford theirs. I'm not even sure we should bail out, just let the chips fall, who knows? They need to do something for themselves too.
9-22-2008 @ 9:50PM
Joe Theep said...
Did you see what happened to oil price today? What do you think will happen when they actually spend that money?
Why do we have to buy their bad paper and they do not have to give up their income after we took their debt?
Why don't they do something to create jobs instead of something that will destroy jobs? This was done in Japan and they had a recession for 10 years.
Always Vote! Never vote for any incumbent. Until we get ride of these parasites we will never be free again.
9-22-2008 @ 10:32PM
NoInform8tion said...
Joe, What if the powers that be keep picking the same type of parasites for us to vote in? What if they're all basically the same just have different party names to trick us? What if all the choices are handpicked so now matter how we choose the outcome will be the same, they will work for lobbyist and big corporations? What if none of the choices care about the people anymore?
9-23-2008 @ 7:50AM
Not Buying It said...
What is capitalism anyway?
You invest - take risks! you win you lose you fall and get up again. I am not a millionaire and I am not willing to take the fall for the millionaires, billionaires when middle class people like me could not get help when they were trying to get help from foreclosure on their homes. Short sales weren't enough to cover mortgages. Mortgage bankers who marketed the adjustable mortgages could have added the service of calling on the clients that they sucked into the program and refinanced at a fixed rate. Women with children, including army wives, seniors living in America are living in despair with no power because energy bills are too high, food costs are too high; oil, if you have a car is too high. Government is considering taking buses away in regions where they are needed because operating costs are too high.
No! Don't bail them out! If those people who had more money in the brokerage companies where they would be insured up to $500,000 under SIPC. TOO BAD! We the less fortunate people have enough on our plate. Why should we pay for their risks?
With this $700 billion bail out, US Government has China as the owner of the treasury bonds. They own us. US Government is selling us out. Unless US Government offer these bonds to US only, other countries will have the power over us.
GOD BLESS AMERICA, BECAUSE I LIVE HERE!
Where are the smart investors?
9-23-2008 @ 11:43AM
Mark Benfer said...
I am an American Tax payer and I am furious over the idea that this government is even considering using our tax money to buy and hold failing morgages.
This clearlly sends the wrong message saying Wall Street rules while the tax payers lose!!
I could never vote for a condidate that would scam the American public and rob our children of there future. This problem belongs to our generation not the next.
This plan benefits the rich and Wall Street while making life miserable with higher inflation for the middle and lower classes.
Isn't it the Federal Reserve's job to help keep inflation low rather than make it go through the roof.
Stop this SCAM now!!
Thank you
Mark Benfer
9-24-2008 @ 2:07AM
Bruce Calaberse said...
Real Simple Solutiuon: Example: Columbus, Ohio - 16th largest real
estate market in US. There are 25,000 current real estate listings
in Columbus, Ohio totalling 4.275 billion dollars. The Government
needs to buy them up as of a fixed date. Of those listings 12% of
them are rentals and 25+% of them will be bought by a person that
just sold an existing listing to the government. That comes to 2.6
billion dollars to completely fix the Columbus, Ohio real estate
market. The government then needs to sell those listings over time
at new market prices. Do you realize what that would do to any and
all real estate markets? Do you realize how much will come back to
the banks in paid off loans, back interest and fees? Do you realize
what that does to the written down real estate of the banks? How
about all the industry related businesses of real estate? It
immediately puts a bottom in each and every market the government
chooses to fix. Take the top 150 real estate markets in the US and
it should cost about 500 billion dollars. It would be an instant
success and completely fix all related industries that are currently
in financial trouble. It will be less of a burden on the tax payer
and the government would now be holding newly appreciating assets as
collateral (houses) instead of the toxic garbage securities it
intends to hold. The crooks on wall street that caused this mess
will not get all of the relief. The relief will be spead equitably
across a true cross section of the economy that deserves it. The
Equitable solution is the only fair way of taking our money and
fixing the problem and that way an ex Wall Street Chief (Hank
Paulson) is not handling our tax money, we are. It goes right to
main street and eventually much of it will trickle up to Wall Street.
This time we will enforce instead of over regulate wall street.
Equitable Plan - bruce@eqfin.com