[Marxism] G-7 declaration seems to fall short of "global solution"

["Fred Feldman" <ffeldman@xxxxxxxxxxxxxxxx>]

The following two articles on the G7 meeting indicate that it may not have
achieved the "global solution" demanded by the New York Times and Washington
Post in editorials today.

The introduction to the articles is by Prof. Mark Jensen, an invaluable
contributor to the Washington State antiwar Snow-News list.
Fred Feldman


NEWS: As crisis worsens, short G-7 declaration seems to many to fall short

[Just before midnight (EDT) of Fri., Oct. 10, *Le Monde* (Paris) reported
that the G-7 countries had agreed on a five point plan; Alain Faujas
reported in detail on its five points and quoted from the text, which
contemplates the partial nationalization of American banks.[1] -- *Le
Monde* said that it would be necessary to wait until Monday to know
whether the plan would boost share prices, but the *Boston Globe* reported
late Friday that the 266-word statement's promise to "take all necessary
steps to unfreeze credit and money markets" failed to explain "how that
would be accomplished."[2] -- "'Markets wanted to get a game plan from
the G-7 and they haven't got that,' said Sophia Drossos, a New York-based
currency strategist at Morgan Stanley. 'There might be disappointment.'" 
-- The *New York Times*
(http://www.nytimes.com/2008/10/11/business/11global.html) also expressed
disappointment, saying that "the nations were vague on how or when [bank
nationalization, which the *Times* described with a circumlocution ("the
United States taking ownership stakes") apparently because
"nationalization" is considered unthinkable] will happen, and did not
endorse a proposal by Britain to provide coordinated guarantees of lending
between banks, as a way to shake loose credit markets. . . . Many
investors had hoped the meeting of the finance ministers from the world?s
leading economies would result in more concrete steps . . . 'This fell
short,' said Adam Posen, the deputy director of the Peterson Institute for
International Economics." -- "[T]he swiftness of events is forcing
officials to throw out decades of conventional wisdom about how free
markets should operate," Mark Landler said. -- He also said that the G-7
nations' "lack of agreement on a British-style guarantee of loans made
between banks worried economists" because "[i]f other countries do not
follow the same course as Britain, they said, it could destabilize the
financial system, because money may flow to Britain from countries without
those same guarantees." --Mark]

http://www.ufppc.org/content/view/7965/

1.

[From *Le Monde* (Paris)]

Special edition

The financial crisis

G-7 SUPPORT IDEA OF PARTIAL NATIONALIZATION OF AMERICAN BANKS
By Alain Faujas

Le Monde (Paris)
October 11, 2008

http://www.lemonde.fr/la-crise-financiere/article/2008/10/11/le-G-7-soutient
-l-idee-d-une-nationalisation-partielle-des-banques-americaines_1105621_1101
386.html

Not until the opening of European stock exchanges on Mon., Oct. 13, will
it be known whether the markets will greet the "action plan" adopted on
Oct. 10 by the the G-7 (Canada, France, Germany, Great Britain, Italy,
Japan, United States) with a much hoped-for boost in share prices.

The first of the five elements of the plan calls for all important
financial institutions to be protected -- and by every means -- from
failure. That means that a part of the $700bn (518m euros) in the Paulson
plan to rid American banks of their toxic assets will be used to
recapitalized institutions facing problems, so as to avoid a repetition of
the disastrous consequences of the refusal to save Lehman Brothers.

Henry Paulson, the American secretary of the Treasury, was careful to
specify that the acquisition by the state of bank equity would not include
the right to vote, except when it's a question of "protecting" the
government's "shareholders' rights." But this is still a
quasi-nationalization that the Bush administration till now was refusing,
and which will be offered to "a large number of financial institutions." 
The first beneficiaries may be two banks in great difficulty, Morgan
Stanley and National City.

Peer Steinbrück, the German minister of finance, applauded. Christine
Lagarde, his French alter ego, said: "Listen to what Henry Paulson
announced: we are entering a new world." As for Barack Obama, the
Democratic candidate for the presidency, he approved, because, he said,
it's no longer "time for ideology, it's time for good sense and
pragmatism."

The four other points of the "action plan" are just as practical and can
be put on a small piece of paper in 23 lines of a concision and clarity
unusual for a G-7 text. For the group has understood that the panic that
seized global stock exchanges on Fri., Oct. 10, came from their lack of
understanding of the rescue efforts doled out in disordered fashion by
governments over the past two weeks.

In the second point, the Seven say they want to free up credit and the
money market by guaranteeing to banks "broad access to liquidity." The
third point promises to financial institutions the ability to raise as
much capital as necessary from government and private sources "so as to
reestablish confidence and allow them to continue to lend to households
and businesses."

"PROTECTING TAXPAYERS"

Point 4 promises that "robust and coherent" guarantees will be given to
the deposits of individuals. The fifth envisions helping mortgage markets
to resume, which requires an "appropriate valuation" of assets and
"transparency."

The G-7 communiqué ends with several appeals. Two of them will be attract
much comment. "These actions will be carried out in a way that protects
taxpayers," the text stipulates. Which especially means that the burden
of rescuing banks will not weight only on government budgets, but will
also be shared with the original shareholders, who will see their weight
diminished, and the heads of the institutions, who will be punished for
having failed.

Finally, the G-7 promises total support for the International Monetary
Fund (IMF) in its mission to help countries imperiled by the financial
crisis. The Seven have heard the complaints coming from developing
countries, especially those from the G24, which think that the emergency
food aid of $1.2bn set up by the World Bank is change for the donation
plate compared with the hundreds of billions of dollars devoted to helping
banks and Western economies.

The IMF possesses a financial capaicty of $250bn that it can provide to
countries where liquidity breaks down, essentially in the for of loans. 
Of course, such a sum is insufficient to save a European country, but it
would be enough to rescue economies the size of Iceland or Indonesia.

--
Translated by Mark K. Jensen
Associate Professor of French
Chair, Department of Languages and Literatures
Pacific Lutheran University


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