Darling And Paulson Meet To Discuss Financial Market Turmoil

by Robert Lee, Tax-News.com, London

19 September 2007

Additional measures to regulate the world's financial markets in the context of the recent turmoil will be discussed at the next meetings of the International Monetary Fund, the UK's finance minister Alistair Darling announced following his recent meeting with US Treasury Secretary Henry Paulson.

Darling and Paulson met earlier this week to discuss the volatility that continues to sweep across global markets in the wake of the US sub-prime mortage crisis and subsequent credit crunch. According to Darling, they concluded that "what's necessary is more discipline is needed in the financial system and far more openness".

"Secretary Paulson and I have discussed measures we believe are necessary to improve the regulation of international markets, to encourage greater transparency, and to strengthen cross-border cooperation and communication," Darling revealed. "We look forward to discussing all of these issues at the IMF meetings in Washington next month."

However, despite Darling's claims, Paulson appears to be singing from a slightly different hymn sheet, and is urging against any knee-jerk regulatory reactions to the current crisis. "I think it's important to be vigorous, but not to overreact," Paulson told reporters at a Downing Street press conference following their meeting.

Earlier that day, Paulson told reporters following his meeting with French Finance Minister Christine Legarde that: "I'm not eager to start pointing fingers in the middle of this market turbulence."

"There certainly should be and will be some changes," he explained, but added that: "I'm just leaning against the wind a little bit because I don't want to overreact in ways that penalise the global economy for years to come."

Darling, Paulson and other finance ministers have been attempting to send a reassuring message to investors and the markets as banking liquidity dries up. In the UK, Northern Rock, one of the country's largest mortgage lenders, has become the most high-profile victim of the credit crisis, having been forced to use a short-term borrowing facility from the Bank of England to remain in business. The Bank has also guaranteed investors' savings with Northern Rock as savers rush to withdraw their money from the bank.

But Darling believes that the UK economy is well positioned to weather the storm, having grown for sixty consecutive quarters. "Our economic, monetary, fiscal and regulatory framework and tripartite system for the financial markets has underpinned the stability of our economy, and has enabled us to deal with previous international financial turbulence," he stated. On an international level, he reiterated that markets that the world economy is forecast to grow at 5% this year.

"As I have discussed with Secretary Paulson, we will continue to work here and internationally to do everything we can to maintain a stable and strong economy," he concluded.

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