Ambassador Wayne's Speech: "U.S. & International Response to the Global Financial Crisis"

May 14, 2009

Buenos Aires City Bar Association

Introduction

I want to thank Colegio de Abogados de la Ciudad de Buenos Aires (CACBA) President Enrique del Carril, Secretary Héctor Huici, and Treasurer Esteban Carcavallo  for this invitation to address your important organization.   I understand that, throughout your 96 year history, CACBA has been a strong advocate of judicial independence and legal ethics, foundational elements of the Argentine republic and, indeed, of any strong and vibrant democracy.   In a democracy, the effective application of the rule of law is vital to protect human rights and decent living conditions for citizens.  We believe that judicial independence, equality and accountability before the law, observing integrity in applying the law, and the separation of powers are key to achieving political, social and economic development.

Global Financial Crisis

We meet today in the context of a severe downturn in the world economy and I've been asked to speak today on the U.S. and international response to the global financial crisis.  And I'd like to note up-front that Argentina, in its role as a member of the G-20 Group of nations, a group which represents fully 85% of the world's economy, has played an important and responsible role in our common efforts to confront the challenges the global economy faces. 

Without underestimating these challenges, there are signs that the pace of deterioration in economic activity and trade flows has eased.  Some measures of spending in the U.S. and other economies may have begun to stabilize.  Financial conditions in some markets have shown modest improvement, and there are signs that U.S. housing markets are beginning to right themselves. 

We have reason to be somewhat encouraged, but we would be wrong to conclude that we are close to emerging from the darkness that descended on the global economy early last (austral) spring.

The origins of this crisis were a long period of increased borrowing and leverage and the breakdowns in many financial markets and institutions around the world. The consequence is that we are facing the most severe economic crisis since World War II.  We do not have much experience with such crises on a global scale because such crises only happen once in several generations.

A U.S. Recovery Agenda

As President Obama has said, the United States is committed to doing whatever it takes to stimulate growth and demand and to ensure that a crisis like this never happens again.  At home, we're moving forward aggressively on both recovery and reform.  The Obama administration has taken unprecedented action to create jobs and restore the flow of credit. And the administration proposed a clear set of tough, new 21st-century rules of the road for all of our financial institutions.

The American Recovery and Reinvestment Act is mobilizing substantial government resources to create and save jobs, jumpstart our economy, and build the foundation for long-term economic growth. The Act includes measures to modernize the nation's infrastructure, enhance America's energy independence, expand educational opportunities, increase access to health care, provide tax relief, and protect those in greatest need.

The Financial Stability Plan is working to help restart the flow of credit, clean up and strengthen our banks, and provide critical aid for homeowners and for small businesses. As we do each of these things, we will impose new, higher standards for transparency and accountability.

An important note here: We believe our policies must be designed to mobilize and leverage private capital, not to supplant or discourage private capital. When government investment is necessary, it should be replaced with private capital as soon as possible.

An International Recovery Agenda

Our U.S. response to the crisis is, of course, only one part of a larger globally coordinated effort.   The global economy is now so fundamentally interconnected that we can only meet the challenge together.   And history shows us that when nations fail to cooperate, when they turn away from one another, when they turn inward, the price for our people only grows.  That's how the Great Depression deepened.  It’s a mistake that we cannot afford to repeat.

As I mentioned earlier, Argentina is playing an important role in coordinating a global response to a global crisis.  Last month Presidents Kirchner, Obama and other leaders of G-20 nations met in London, where they agreed to tougher and more transparent supervision of banks worldwide.  They committed to taking the action necessary to bring about a resumption of growth, push back against the global recession, and put in place reforms that substantially reduce the odds that crises of this magnitude happen again. 

They agreed to reform and support the IMF, the World Bank, and other multilateral development banks in their efforts to mitigate the effects of the crisis.  They agreed to ensure, by international economic cooperation and by strengthening our international economic institutions, to support growth in emerging markets and developing countries. 

They agreed to reject protectionism and to kick-start global trade.  And they agreed that we have a common obligation to help the poorest, those most vulnerable, but least able to respond to the crisis.

Since this Summit and a follow-on late April meeting in Washington of IMF and World Bank member nations that Finance Minister Carlos Fernandez and Central Bank President Martin Redrado attended,  important steps have been taken to implement the G-20 agenda of economic and financial repair.   A number of major economies, including the United States, have worked to supply the necessary stimulus to domestic demand in each of our countries and stabilize our financial systems to ensure a sustained global recovery.   And countries -- including Argentina  -- have moved forward on the important task of augmenting the resources of the IMF and supporting the World Bank and other multilateral development banks in responsibly stretching their capacity to respond to all members in crisis.

So, the difficult process of reform of national financial regulatory systems is already underway in the United States and many other countries.  However, much remains to be done both nationally and internationally to create a system that is resistant to shocks and abuses, and responsive to the needs and complexities of the 21st century.  When we reach the expansion phase of the coming economic cycle -- which we will -- the resulting global expansion must be more enduring than the one that ended catastrophically in 2008. The global expansion must be balanced – propelled by domestic demand growth in all economies.

The simple truth is that today's global problems require global solutions.  All responsible nations share two principal objectives: early recovery from the current global economic and financial crisis and a significant strengthening of our common defenses against future crises.  In recent months, we have joined together with unprecedented scope and scale toward these objectives.

In the days ahead, I believe we will move forward with a sense of common purpose. We have to do what's necessary to restore growth and to pursue the reforms that can stabilize our financial system well into the future. We have to reject protectionism and accelerate our efforts to support emerging markets. And we have to put in place a structure that can sustain this international cooperation in the years to come.

Thank you.