----- Original Message -----
Sent: Monday, November 17, 2008 5:14 AM
Subject: [TimeandCycles] SELL SELL SELL G-20 Leaders Tighten Grip on
Banks - WSJ.com
At an unprecedented summit, the Group of 20 leaders ordered a regulatory
crackdown on the kind of high-risk lending and investment that has led the world
into a financial mess unseen since the Great Depression. But some economists
worry that the plan may backfire at a time when the global economy needs more
lending, not less.
1:58
President Bush says summit leaders have agreed to a
number of terms to coordinate and modernize their financial systems in the hopes
of keeping the global economic crisis from getting
worse.
"This is a big signal to everybody to clamp down on their banks to tighten
lending standards," said Simon Johnson, a former chief economist at the
International Monetary Fund. "The last thing you want to do in a global credit
crunch is go around and basically tell people to tighten, tighten, tighten."
Some London bankers are already up in arms over a European Union proposal,
similar in outline to the G-20's, that would force banks to hold on to extra
cash to cover certain losses. Banks say that will make raising cash more
expensive and discourage lending.
"We're yelling at banks that...they've been completely imprudent, and
have blown up the financial system, and will have to be more prudent -- but not
right now," said Benn Steil, director for international economics at the Council
on Foreign Relations.
U.S. officials share the concern that too much regulation might worsen the
credit shortage, White House spokesman Tony Fratto said Sunday. But "given the
current psychology in the financial sector, better supervision and transparency
could instead have the effect of reducing fears about counterparty risk and so
increase the appetite for risk-taking