By DPA,
Washington : US President George W. Bush Thursday called for overhauling the “outdated” regulatory structures of the financial industry, but warned against reinventing the free market system that has spurred economic growth for decades.
Speaking ahead of an emergency Washington summit of the world’s 20 leading economies, Bush offered a broad defence of US-style capitalism and free markets, warning leaders to fix the flaws exposed by the financial crisis rather than abandon the system wholesale.
“It would be a terrible mistake to allow a few months of crisis to undermine 60 years of success,” Bush said in a speech in New York.
“History has shown us that that the greater threat to economic prosperity is not too little government involvement in the market, but too much,” Bush said. “Our aim should not be more government – it should be smarter government.”
Leaders of the Group of 20 nations, which includes a mix of wealthy nations and emerging economies, will meet in Washington Saturday to discuss major reforms to the global financial system as well as more immediate measures to avoid a global recession.
European governments had been pushing for a wholesale overhaul of the global financial system, but have since backed away from the heavy rhetoric of October amid signs of internal discord in the European Union.
Wall Street has come under fire from all sides for a culture of “greed” that helped spark the crisis and led to some sharp criticism of the US free-market system. Financial firms took excessive risks in offering loans to homeowners that could not afford them, then sold those loans as part of complex new investment packages.
“We are faced with the prospect of a global meltdown,” Bush warned, noting that many nations have taken “unprecedented steps” that have included significant government intervention in the workings of private firms.
“I’m a market guy, but not when faced with the prospect of a global meltdown,” he said, warning that state intervention must be temporary.
Bush called for more transparency in the financial industry, strengthening international financial institutions and “adapting our financial systems to the realities of the 21st century marketplace.”
He acknowledged that regulators and private credit rating agencies had failed to foresee the collapse of the US housing market that sparked the global credit crisis. But he said free markets remained the best way to foster economic growth.
“It is true that this crisis included failures – by lenders and borrowers and by financial firms and by governments and independent regulators. But the crisis was not a failure of the free market system, and the answer is not to try to reinvent that system. It is to fix the problems we face,” Bush said.
Bush warned that the challenges facing the global economy were “too large” to be solved in one meeting. Leaders will establish the “principles” of regulatory reforms and task lower-level working groups to come up with the specifics in the coming months.
The White House Thursday said it expected a follow-up summit some time in the first three months of next year. The US delegation to that meeting will be headed by president-elect Barack Obama.