Few concrete steps taken at US-led economic summit

World leaders vow action, new global safeguards

(Ron Sachs-Pool/Getty Images)

WASHINGTON - World leaders battling a dire and deepening economic crisis vowed yesterday to cooperate more closely, keep a sharper eye out for red-flag problems and give bigger roles to fast-rising nations - but kicked many hard details down the road for their next summit after President-elect Barack Obama takes office.

Perhaps as important as the modest concrete steps they took, the leaders of the planet's richest nations - and some of the fastest-developing - made clear their recognition of the world's increasingly interconnected financial architecture and the responsibilities that go along with it.

"There shall be no blind spots," Chancellor Angela Merkel of Germany declared. "There is here a great common will to ensure that such a crisis is not repeated."

Underscoring how bad things have gotten this time, President Bush, the summit host, said he had agreed to the recent $700 billion rescue plan for US financial institutions only after being told the nation was at risk of falling into "a depression greater than the Great Depression."

The meeting of the 20 nations - including some which have been sidelined by traditional powers in the past - showcases the importance of a global solution to an interconnected worldwide economic problem, said Representative Barney Frank, a Democrat from Newton.

"There is this realization now that the world economy is even more linked than before," said Frank, chairman of the House Committee on Financial Services. "It's now clear we're in it together."

Frank said the United States and foreign nations need to come up with some kind of coordinated strategy for both stimulating the economy and regulating banks and securities.

But it will be difficult for much progress to be made while Bush is still in office, Frank said, since the lame duck president has been very resistant to both a second stimulus package and enhanced government regulation of financial services.

"This has got to wait for Obama," Frank said. "Bush is sort of resisting reality."

This summit was significant for the far broader range of countries invited, rather than the elite, old-guard group that usually holds such meetings.

"Emerging market countries were not the cause of this crisis, but they are amongst its worst affected victims," declared Prime Minister Manmohan Singh of India.

Leaders from 21 nations and four international organizations attended the emergency summit that was held as Washington was blanketed in a gray mist and which took on a workaday feel appropriate to the grim crisis that drew them together.

At the conclusion of the two-day summit, they released a joint communique that was modest in scope but high in hopes.

Covering eight pages and 47 action items, the document's overarching focus is to establish a series of new safeguards for the fragile and opaque global financial system.

Nearly all the efforts are aimed in some way at better flagging risky investment patterns and regulatory weak spots before they bring down companies and then ripple dangerously through entire economies, as has happened in recent months.

To that end, the leaders called for such mundane things as "supervisory colleges," where financial regulators can compare market notes across countries, better cooperation between nations on regulations, the eventual standardization of accounting rules governing how companies can value potentially tricky assets, and new attention to credit-rating agencies.

The leaders also supported expanding the membership of the Financial Stability Forum, a group that has been examining the causes of the financial crisis and crafting ways to prevent future problems. And the group called for broadening the financial police work of the 63-year-old International Monetary Fund as well as modernizing the institution to better keep pace with the changing economic environment.

None of the items was splashy, and most would be understandable to few outside of financial experts, but officials argued they have far-reaching potential.

"It's not glamour," said President Nicolas Sarkozy of France.

Susan Milligan of the Globe staff contributed to this report.