G-20 Summit: Start of a New World Order?
Tuesday September 29, 2009
Did the G-20 summit in Pittsburgh mark the beginning of a new world economic order? Yes, according to an article in the BBC. The G-20 Summit proposals go far beyond just increasing banks' capital requirements. The G-20 seeks to regulate hedge funds, tax havens and executive pay - something that would have been unthinkable before the economic crisis.
The G-20 proposals are "unprecedented," according to Tim Ryan, chief executive officer of the Securities Industry and Financial Markets Association. The industry does not like the proposals, saying increased regulations will hamper the ability of banks to recover from the recession. This is a good point. However, the G-20 has been asking for these regulation for two years. This is the first time the U.S. has been willing to agree.
The Summit established a new Financial Stability Board which establishes common financial regulations for all G-20 countries. The Board will work with the World Bank and the IMF who have been subcontracted to implement many of these policies.
New regulations will:
•Require banks to hold more capital, providing a cushion to prevent further bailouts.
•Tie executive pay to long-term, not short-term, performance.
•Make sure companies that are "too big to fail," like AIG, to develop international contingency plans so their collapse wouldn't threaten the entire global economy.
•Move all derivatives contracts onto exchanges or electronic platforms so they can be better monitored.
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