FT.com / US - Paulson says crisis sown by imbalance
Global economic imbalances helped to foster the credit crisis by pushing down global interest rates and driving investors towards riskier assets, outgoing US Treasury Secretary Hank Paulson told the Financial Times.In a valedictory interview, Mr Paulson cast the crisis as partly the result of a collective failure to come to terms with the way the rise of emerging markets was reshaping the global financial system. These imbalances - arising from differences in the inclinations of different nations to save and invest - are reflected in large current account deficits and surpluses around the world.The US Treasury Secretary said that in the years leading up to the crisis, super-abundant savings from fast-growing emerging nations such as China and oil exporters - at a time of low inflation and booming trade and capital flows - put downward pressure on yields and risk spreads everywhere.This argument - already advanced by a number of economists and largely endorsed by Federal Reserve chairman Ben Bernanke - suggests that the roots of the crisis do not simply lie in failures within the financial system.
In a valedictory interview, Mr Paulson cast the crisis as partly the result of a collective failure to come to terms with the way the rise of emerging markets was reshaping the global financial system. These imbalances - arising from differences in the inclinations of different nations to save and invest - are reflected in large current account deficits and surpluses around the world.
The US Treasury Secretary said that in the years leading up to the crisis, super-abundant savings from fast-growing emerging nations such as China and oil exporters - at a time of low inflation and booming trade and capital flows - put downward pressure on yields and risk spreads everywhere.
This argument - already advanced by a number of economists and largely endorsed by Federal Reserve chairman Ben Bernanke - suggests that the roots of the crisis do not simply lie in failures within the financial system.
But you know, I still like to visit China. They've built some really fine luxus hotels, and they can really cook."
henry paulson, in the introduction to the new book; "who coulda known?" "Life shrinks or expands in proportion to one's courage." - Anaïs Nin
The US Treasury set out for the first time on Friday a basic framework it uses to evaluate whether a troubled financial institution is systemically important enough to justify emergency aid.The criteria were contained in reports to Congress under the Emergency Economic Stabilisation Act, which created the $700bn bail-out fund. The criteria were disclosed amid pent-up demand from investors for greater transparency and predictability on the approach to financial rescues.
The criteria were contained in reports to Congress under the Emergency Economic Stabilisation Act, which created the $700bn bail-out fund. The criteria were disclosed amid pent-up demand from investors for greater transparency and predictability on the approach to financial rescues.
