The global financial crisis: Analysis and policy implications

Global Financial Crisis

Volumn , Issue , 2010, Pages 133-240

  Nanto, Dick K ^a  

^a NONE

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EID: 84895270775     PISSN: None     EISSN: None     Source Type: Book    
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References (221)

1. For a more complete list of major developments and actions, see Appendix A.
2. Prepared by Dick K. Nanto, Specialist in Industry and Trade, Foreign Affairs, Defense, and Trade Division.
3. A moral hazard is created if a government rescue of private companies encourages those companies and others to engage in comparable risky behavior in the future, since the perception arises that they will again be rescued if necessary and not have to carry the full burden of their losses.
4. See, for example, Friedman, George and Peter Zeihan. "The United States, Europe and Bretton Woods II." A Strafor Geopolitical Intelligence Report, October 20, 2008.
5. See Board of Governors of the Federal Reserve System, Federal Reserve Press Release, March 18, 2009. U.S. Department of the Treasury, U.S. Treasury and Federal Reserve Board Announce Launch of Term Asset-Backed Securities Loan Facility (TALF), Press Release tg-45, March 3, 2009. CRS Report RL3 1416, Monetary Aggregates: Their Use in the Conduct of Monetary Policy, by Marc Labonte.
6. Eric S. Rosengren, Addressing the Credit Crisis and Restructuring the Financial Regulatory System: Lessons from Japan, Federal Reserve Bank of Boston, Paper given at the Institute of International Bankers Annual Washington Conference, Boston, MA, March 2, 2009.
7. Thomas F. Cooley, "Swedish Banking Lessons," Forbes.com, January 28, 209.
8. U.S. Department of the Treasury, Treasury Department Releases Details on the Public Private Partnership Investment Program, Press Release tg-65, March 23, 2009.
9. Camilla Anderson, IMF Spells Out Need for Global Fiscal Stimulus, International Monetary Fund, IMF Survey Magazine: Interview, Washington, DC, December 28, 2008.
10. David Saha and Jakob Von Weizsäcker, Estimating the size of the European stimulus packages for 2009, Brugel, JVW/ DS, 12 December 2008.
11. Charles Freedman, Michael Kumhof, Douglas Laxton, and Jaewoo Lee, The Case for Global Fiscal Stimulus, International Monetary Fund, IMF Staff Position Note SPN/09/03, March 6, 2009.
12. Steven Pearlstein, "Asia, Europe Find Their Supply Chains Yanked. Beware the Backlash," The Washington Post, February 20, 2009, pp. D1, D3.
13. The Bretton Woods Agreements in 1944 established the basic rules for commercial and financial relations among the world's major industrial states and also established what has become the World Bank and International Monetary Fund.
14. Information on the London G-20 Summit is available at http://www.londonsummit.gov.uk/en/.
15. Group of Twenty Nations. "London Summit-Leaders' Statement," 2 April 2009 [http://www.londonsummit.gov.uk/resources
16. Friedman, George and Peter Zeihan. "The United States, Europe and Bretton Woods II." A Strafor Geopolitical Intelligence Report, October 20, 2008.
17. Dennis C. Blair, Annual Threat Assessment of the Intelligence Community for the Senate Select Committee on Intelligence, Director of National Intelligence, Washington, DC, February 12, 2009. See also, U.S. Senate, Committee on Foreign Relations, "Foreign Policy Implications Of The Global Economic Crisis," Roundtable before the Committee On Foreign Relations, February 11, 2009.
18. Johnston, Tim. "Asia Nations Join to Prop Up Prices," Washington Post, November 1, 2008, p. A10.
19. "Record Fall in NZ Commodity Price Gauge," The National Business Review, November 5, 2008.
20. Joby Warrick, "Experts See Security Risks in Downturn, Global Financial Crisis May Fuel Instability and Weaken U.S. Defenses," Washington Post, November 15, 2008. P. A01.
21. Bokhari, Farhan, "Pakistan's War On Terror Hits Roadblock, Global Economic Crisis Prompts Military To Consider Spending Cutbacks," CBS News (online version), October 28, 2008.
22. Bureau of National Affairs, "WTO Report Finds 'Limited' Impact So Far of Financial Crisis on Higher Trade Barriers," International Trade Reporter, 26 ITR 143, January 29, 2009.
23. Report by the World Trade Organization quoted in: Chris Nelson, The Nelson Report, Samuels International Associates, Inc., January 15, 2009.
24. H.R. 1 (P.L. 111-5) Sec. 1605 provides that none of the funds appropriated or otherwise made available by the act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States provided that such action would not be inconsistent with the public interest, such products are not produced in the United States, and would not increase the cost of the overall project by more than 25%.
25. "Europe Warns against 'Buy American' Clause," Spiegel Online International, February 3, 2009, Internet edition.
26. The G-7 includes Canada, France, Germany, Italy, Japan, United Kingdom, and the United States. The G-8 is the G-7 plus Russia. The G-20 adds Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea, and Turkey.
27. See CRS Report R40417, Macroprudential Oversight: Monitoring the Financial System, by Darryl E. Getter.
28. Progress on these items as of mid-March 2009 is summarized in: U.K. Chair of the G20, Progress Report on the Immediate Actions of the Washington Action Plan, Annex to the G20 Finance Ministers' and Central Bank Governors' Communique-14 March, London, March 14, 2009.
29. Prepared by Dick K. Nanto, Specialist in Industry and Trade, Foreign Affairs, Defense, and Trade Division.
30. Edmund Conway, "WEF 2009: Global crisis 'has destroyed 40pc of world wealth' ," Telegraph.co.uk, January 29, 2009, Internet edition.
31. Morgenson, Gretchen, "Behind Insurer's Crisis, Blind Eye to a Web of Risk," The New York Times (Internet edition), S'/eptember 27, 2008.
32. For an analysis of global production networks, see CRS Report R40 167, Globalized Supply Chains and U.S. Policy, by Dick K. Nanto.
33. Christopher Swann, "Japan Signs Deal to Boost IMF Lending Capacity by $100 Billion ," Bloomberg.com, February 13, 2009.
34. "EU Pledges 75 Billion Euros to Boost IMF ," Deutsche Welle., March 20, 2009, www.dw-world.de.
35. See CRS Report R40417, Macroprudential Oversight: Monitoring the Financial System, by Darryl E. Getter.
36. U.S. Department of the Treasury. The Department of the Treasury Blueprint for a Modernized Financial Regulatory Structure. March 2008. 217 p.
37. For analysis and recommendations by the International Monetary Fund, see "Global Financial Stability Report, Financial Stress and Deleveraging, Macro-Financial Implications and Policy," October 2008. 246 p.
38. For information on Basel II, see CRS Report RL34485, Basel II in the United States: Progress Toward a Workable Framework, by Walter W. Eubanks.
39. For recommendations by the Financial Stability Forum, see "Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience, Follow-up on Implementation," October 10, 2008. 39 p.
40. Prepared by Dick K. Nanto. See also, CRS Report RL34730, The Emergency Economic Stabilization Act and Recent Financial Turmoil: Issues and Analysis, by Baird Webel and Edward V. Murphy.
41. For a review of past financial crises, see Luc Laeven and Fabian Valencia. "Systemic Banking Crises: A New Database," International Monetary Fund Working Paper WP/08/224, October 2008. 80p.
42. Gelpern, Anna. "Emergency Rules," The Record (Bergen-Hackensack, NJ), September 26, 2008.
43. From 2005-2007, the U.S. current account deficit (balance of trade, services, and unilateral transfers) was a total of $2.2 trillion.
44. Reuters. Factbox-Global foreign exchange reserves. October 12, 2008.
45. See CRS Report RL34336, Sovereign Wealth Funds: Background and Policy Issues for Congress, by Martin A. Weiss.
46. See U.S. Joint Economic Committee, "Chinese FX Interventions Caused international Imbalances, Contributed to U.S. Housing Bubble," by Robert O'Quinn. March 2008.
47. For further analysis, see CRS Report RL34412, Containing Financial Crisis, by Mark Jickling, U.S. Joint Economic Committee, "The U.S. Housing Bubble and the Global Financial Crisis: Vulnerabilities of the Alternative Financial System," by Robert O'Quinn. June 2008.
48. Fannie Mae (Federal National Mortgage Association) is a government-sponsored enterprise (GSE) chartered by Congress in 1968 as a private shareholder-owned company with a mission to provide liquidity and stability to the U.S. housing and mortgage markets. It operates in the U.S. secondary mortgage market and funds its mortgage investments primarily by issuing debt securities in the domestic and international capital markets. Freddie Mac (Federal Home Loan Mortgage Corp) is a stockholder-owned GSE chartered by Congress in 1970 as a competitor to Fannie Mae. It also operates in the secondary mortgage market. It purchases, guarantees, and securitizes mortgages to form mortgage-backed securities. For an analysis of Fannie Mae and Freddie Mac's role in the subprime crisis, see David Goldstein and Kevin G. Hall, "Private sector loans, not Fannie or Freddie, triggered crisis," McClatchy Newspapers, October 12, 2008.
49. A credit default swap is a credit derivative contract in which one party (protection buyer) pays a periodic fee to another party (protection seller) in return for compensation for default (or similar credit event) by a reference entity. The reference entity is not a party to the credit default swap. It is not necessary for the protection buyer to suffer an actual loss to be eligible for compensation if a credit event occurs. The protection buyer gives up the risk of default by the reference entity, and takes on the risk of simultaneous default by both the protection seller and the reference credit. The protection seller takes on the default risk of the reference entity, similar to the risk of a direct loan to the reference entity. See CRS Report RS22932, Credit Default Swaps: Frequently Asked Questions, by Edward V. Murphy.
50. Notional value is the face value of bonds and loans on which participants have written protection. World GDP is from World Bank. Development Indicators.
51. International Swaps and Derivatives Association, ISDA Applauds $25 Trn Reductions in CDS Notionals, Industry Efforts to Improve CDS Operations. News Release, October 27, 2008.
52. For information on the International Swaps and Derivatives Association, see http://www.isda.org. In 2008, credit derivatives had collateralized exposure of 74%. See ISDA, Margin Survey 2008. Collateral calls have been a major factor in the financial difficulties of AIG insurance.
53. Thomas M. Anderson, "Best Ways to Invest in BRICs," Kiplinger.com, October 18, 2007.
54. For these and other indicators of the crisis in credit, see http://www.nytimes.com/interactive/2008/10/08/business/economy/20081008-credit-chart-graphic.html.
55. Prepared by Martin A. Weiss, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade Division.
56. Mark Scott, "Economic Problems Threaten Central and Eastern Europe," Business Week, October 17, 2008.
57. Information on ongoing IMF negotiations is available at http://www.imf.org.
58. International Monetary Fund, "IMF Executive Board Approves Stand-by Arrangement for Pakistan." Press Release No. 08/303, November 24, 2008.
59. Reinhart, Carmen and Calvo, Guillermo (2000): When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options. Published in: in Peter Kenen and Alexandre Swoboda, eds. Reforming the International Monetary and Financial System (Washington DC: International Monetary Fund, 2000) (2000): pp. 175-201.
60. "New paradigm changes currency rules," Oxford Analytica, January 17, 2008.
61. See CRS Report RL34336, Sovereign Wealth Funds: Background and Policy Issues for Congress, by Martin A. Weiss.
62. Cigdem Akin and M. Ayhan Kose, "Changing Nature of North-South Linkages: Stylized Facts and Explanations." International Monetary Fund Working Paper 07/280. Available at http://www.imf.org/external/pubs/ft/wp/2007/wp07280.pdf.
63. Joanna Slater and Jon Hilsenrath, "Currency-Price Swings Disrupt Global Markets ," Wall Street Journal, October 25, 2008.
64. Arvind Subramanian , "The Financial Crisis and Emerging Markets," Peterson Institute for International Economics, Realtime Economics Issue Watch, October 24, 2008.
65. The Group of Ten is made up of eleven industrial countries (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States).
66. Stephen Jen and Spyros Andreopoulos, "Europe More Exposed to EM Bank Debt than the U.S. or Japan," Morgan Stanley Research Global, October 23, 2008.
67. Dirk Willem te Velde, "The Global Financial Crisis and Developing Countries," Overseas Development Institute, October 2008.
68. David Roodman, "History Says Financial Crisis Will Suppress Aid," Center for Global Development, October 13, 2008.
69. Prepared by J. F. Hornbeck, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade Division.
70. United Nations. Economic Commission on Latin America and the Caribbean. Latin America and the Caribbean in the World Economies, 2007. Trends 2008. Santiago: October 2008. p. 28.
71. Decoupling generally refers to economic growth trends in one part of the world, usually smaller emerging economies, becoming less dependent (correlated) with trends in other parts of the world, usually developed economies. See Rossi, Vanessa. Decoupling Debate Will Return: Emergers Dominate in Long Run. London: Chatham House, 2008. p. 5.
72. Ocampo, Jose Antonio. The Latin American Boom is Over. REG Monitor. November 2, 2008.
73. Latin American Newsletters. Latin American Economy and Business. London: October 2008. pp. 1-3 and Fidler, Stephen. Going South. Financial Times. January 9, 2009. p. 7.
74. International Monetary Fund. Regional Economic Outlook. Western Hemisphere: Grappling with the Global Financial Crisis. Washington, D.C. October 2008. pp. 7-10.
75. A summary of these trends is presented in: United Nations. Economic Commission on Latin America and the Caribbean. Preliminary Overview of the Economies of Latin America and the Caribbean 2008. Santiago, 2008.
76. Board of Governors of the Federal Reserve System. Federal Reserve Press Release. October 29, 2008.
77. Loser, Claudio. Stimulus Packages: How Much Can the Region Afford? Latin American Advisor. Inter-American Dialogue. January 29, 2009.
78. Global Outlook. Mexico. March 17, 2009.
79. International Monetary Fund. Global Markets Monitor. March 16, 2009.
80. The Wall Street Journal. Mexico and Brazil Step In to Fight Currency Declines, October 24, 2008 and Latin America Monitor: Mexico. December 2008.
81. Latin American Newsletters. Latin American Mexico and NAFTA Report, March 2009, p. 10 and Latin America Monitor: Mexico, March 2009, p. 3.
82. Latin American Newsletters. Latin American Economy & Business, February 2009, pp. 4-6 and
83. Loser, Claudio. Stimulus Packages: How Much Can the Region Afford?, January 29, 2009.
84. Business Monitor International. Latin American Monitor: Brazil. March 2009.
85. Latin American Brazil & Southern Cone Report, January 2009, p. 12.
86. Brazil-U.S. Business Council. Brazil Bulletin. October 27, 2008 and December 8, 2008.
87. Soliani, Andre and Iuri Dantas. Brazil Freezes 37.2 Billion Reais of 2009 Budget. Bloomberg Press. January 27, 2009 and
88. Loser, Claudio. Stimulus Packages: How Much Can the Region Afford?, January 29, 2009.
89. Latin American Newsletters. Latin American Economy & Business, January 2009, pp. 10-11 and Republica Argentina. Ministerio de Economia y Finanzas Publicas. Instituto Nacional de Estadistica y Censos (INDEC). Utilizacion de la Capacidid Instalada en la Industria. Buenos Aires. January 2009.
90. Benson, Drew and Bill Farles. Argentine Bonds, Stocks Tumble on Pension Fund Takeover Plan. Bloomberg. October 21, 2008 and International Monetary Fund. Global Markets Monitor. March 17, 2009.
91. Republica Argentina. Ministerio de Economia y Finanzas Publicas. Instituto Nacional de Estadistica y Censos. Intercambio Comercial Argentino. Buenos Aires, January 28, 2009.
92. Global Insight. Argentina: S&P Lowers Argentina's Rating to B-. November 3, 2008 and Latin America Weekly Report. Lula May Accept Argentine Protectionism. March 12, 2009. p. 8.
93. International Monetary Fund. Regional Economic Outlook. Western Hemisphere: Grappling with the Global Financial Crisis. Washington, DC. October 2008. p. 8ff.
94. Latin American Brazil & Southern Cone Report, February 2009, p. 3.
95. Ibid., Latin American Brazil & Southern Cone Report, January 2009, p. 10, and IMF. Global Markets Monitor. March 2, 2009.
96. Prepared by William H. Cooper, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade Division.
97. Financial Times. February 16, 2009.
98. Financial Times. February 18, 2009.
99. Economist Intelligence Unit.
100. Open Source Center. Government Bails Out Oil Companies Suffering From World Financial Crisis. October 30, 2008.
101. Economist Intelligence Unit. Monthly Report-Russia. October 2008. p. 7.
102. U.S. Department of Energy. Energy Information Administration.
103. http://www.quote.ru.
104. Central Bank of Russia.
105. Financial Times.
106. Prepared by James K. Jackson, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade Division.
107. For additional information, see CRS Report R40415, The Financial Crisis: Impact on and Response by The European Union, by James K. Jackson.
108. Pan, Phillip P., Economic Crisis Fuels Unrest in E. Europe, The Washington Post, January 26, 2009, p, A1.
109. Regional Economic Outlook: Europe, International Monetary Fund, April, 2008, p. 19-20; and EU Banking Structures, European Central Bank, October 2008, p. 26.
110. Frank, Nathaniel, Brenda Gonzalez-Hermosillo, and Heiko Hesse, Transmission of Liquidity Shocks: Evidence from the 2007 Subprime Crisis, IMF Working Paper #WP/08/200, August 2008, the International Monetary Fund.
111. Flash Estimates for the Fourth Quarter of 2008, Eurostat news release, STAT/09/19, February 13, 2009.
112. Hilsenrath, Jon, Joellen Perry, and Sudeep Reddy, Central Banks Launch Coordinated Attack; Emergency Rate Cuts Fail to Halt stock Slide; U.S. Treasury Considers Buying Stakes in Banks as Direct Move to Shore Up Capital, the Wall Street Journal, October 8, 2008, p. A1.
113. Castle, Stephen, British Leader Wants Overhaul of Financial System, The New York Times, October 16, 2008.
114. The G-7 consists of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
115. Summit of the Euro Area Countries: Declaration on a Concerted European Action Plan of the Euro Area Countries, European union, October 12, 2008.
116. EU Sets up Crisis Unit to Boost Financial Oversight, Thompson Financial News, October 16, 2008.
117. Bradbury, Adam, EU Eyes Next Step on Clearing, The Wall Street Journal Europe, January 7, 2009. p. 21.
118. Communication From the Commission, From Financial Crisis to Recovery: A European Framework for Action, European Commission, October 29, 2008.
119. The Lisbon Strategy was adopted by the EU member states at the Lisbon summit of the European Union in March 2001 and then recast in 2005 based on a consensus among EU member states to promote long-term economic growth and development in Europe.
120. The combination of labor market flexibility and security for workers.
121. Hall, Ben, George Parker, and Nikki Tait, European Leaders Decide on Deadline for Reform Blueprint, Financial Times, November 8, 2008, p. 7.
122. Benoit, Bernard, Germany Doubles Size of Stimulus, Financial Times, January 6, 2009, p. 10;
123. Walker, Marcus, Germany's Big Spending Plans, The Wall Street Journal Europe, January 13, 2009, p. 3.
124. Benoit, Bernard, German Stimulus Offers Job Promise, Financial Times, December 16, 2008. p. 1.
125. Walker, Marcus, Germany Mulls $135 Billion in Rescue Loans, The Wall Street Journal Europe, January 8, 2009. p. 1.
126. Steinbruck, Peer, Germany's Way Out of the Crisis, The Wall Street Journal, December 22, 2008.
127. Parussini, Gabrielle, France to Give Banks Capital, With More Strings Attached, The Wall Street Journal Europe, January 16, 2009, p. A17.
128. Gauthier-Villars, David, Leading News: France Sets Stimulus Plan, The Wall Street Journal Europe, December 5, 2008, p. 3.
129. Hall, Ben, France Gives Renault and Peugeot E.U.R 779m, Financial Times, December 16, 2008, p. 4.
130. Abboud, Leila, France Considers New Measures to Aid Auto Companies, The Wall Street Journal Europe, January 15, 2009, p. 4.
131. The Bank of England, Financial Stability Report, April 2008, p. 10.
132. Scott, Mark, Is Britain's Stimulus Plan a Wise Move?Business Week, November 24, 2008;
133. Werdigier, Julia, Britain Offers $30 Billion Stimulus Plan, The New York Times, November 25, 2008.
134. Falloon, Matt, and Mike Peacock, UK Government to Borrow Record Sums to Revive Economy, The Washington Post, November 24, 2008.
135. Real Help for Business, press release, Department for Business, Enterprise and Regulatory Reform, January 14, 2009;
136. Mollenkamp, Carrick, Alistair MacDonald, and Sara Schaefer Munoz, Hurdles rise as U.K. Widens Stimulus Plan, The Wall Street Journal Europe, January 14, 2009, p. 1.
137. Benoit, Bertrand, Tom Braithwaaite, Jimmy Burns, Jean Eaglesham, et. al., Iceland and UK clash on Crisis, Financial Times, October 10, 2008, p. 1.
138. Anderson, Camilla, Iceland Gets Help to Recover From Historic Crisis, IMF Survey Magazine, November 19, 2008.
139. Iceland Raises Key Rate by 6 Percentage Points, The New York Times, October 29, 2008.
140. Jolly, David, Nordic Countries Add $2.5 Billion to Iceland's Bailout, The New York Times, November 20, 2008.
141. Wardell, Jane, Iceland's Financial Crisis Escalates, BusinessWeek, October 9, 2008;
142. Pfanner, Eric, Meltdown of Iceland's Financial system Quickens, The New York Times, October 9, 2008.
143. Portes, Richard, The Shocking Errors Behind Iceland's Meltdown, Financial Times, October 13, 2008, p. 15.
144. Buiter, Willem H., and Anne Sibert, The Icelandic Banking Crisis and What to Do About it: The Lender of Last Resort Theory of Optimal Currency Areas. Policy Insight No. 26, Centre for Economic Policy Research, October 2008. p. 2.
145. Prepared by Ben Dolven, Asia Section Research Manager, Foreign Affairs, Defense, and Trade Division.
146. Japan Logs Trade Deficit on Slumping World Demand, Reuters, November 22, 2008.
147. Despite Ambivalence, Pakistan May Wrap Deal by Next Week, The Wall Street Journal, October 28, 2008.
148. IMF 'Has Six Days to Save Pakistan,' Financial Times, October 28, 2008.
149. Pakistan Says it will Need Financing Beyond IMF Deal, The Wall Street Journal, November 17, 2008.
150. See, for instance, Morgan Stanley report, "EM Currencies, No Differentiation in the Sell-Off," October 23, 2008.
151. See, for instance, Jeffrey Sachs, The Best Recipe for Avoiding a Global Recession, Financial Times, October 27, 2008.
152. The moved was announced in a November 14 opinion piece by Japanese Prime Minister Taro Aso, Restoring Financial Stability, printed in The Wall Street Journal.
153. Leaders of Europe and Asia Call for Joint Economic Action, New York Times, October 25, 2008.
154. Chinese Premier Blames Recession on U.S. Actions, Wall Street Journal, January 29, 2009.
155. ASEAN's members are Indonesia, Singapore, Malaysia, Thailand, the Philippines, Brunei, Vietnam, Cambodia, Laos and Burma (Myanmar).
156. For a fuller discussion of the Chiang Mai Initiative, see East Asian Cooperation, Institute of International Economics, http://www.iie.com/publications/chapters_preview/345/3iie3381.pdf.
157. Japan, China, S. Korea Eye Financial Stability Forum, Reuters, October 20, 2008.
158. Asian Leaders See Growth Driver, The Wall Street Journal, December 15, 2008.
159. Japan Passes Contentious Stimulus Budget, Associated Press, January 27, 2009.
160. The section on China was prepared by Wayne M. Morrison, Specialist in Asian Trade and Finance, Foreign Affairs, Defense, and Trade Division.
161. For an overview of the China Investment Corporation, see CRS Report RL34337, China's Sovereign Wealth Fund, by Michael F. Martin.
162. China's holdings of Fannie Mae and Freddie Mac securities are likely to be more substantial, but less risky (compared to other sub-prime securities), especially after these two institutions were placed in conservatorship by the Federal Government in September 2008.
163. China's economy was already slowing down before the global financial crisis hit. This was in large part the result of government efforts to slow the rate of inflation. China's real GDP growth fell from 13% in 2007 to 9% in 2008. The global financial crisis has sharply diminished economic growth. Thus, the Chinese government has abandoned its anti-inflation policies and instead has sought to stimulate the economy.
164. However, the Shanghai Index is one of the few global indexes to experience positive growth in 2009; from January 5, 2009, to March 18, 2009, it was up 18%.
165. Global Insight, China, March 18, 2009.
166. According to Xinhua Net (March 9, 2008), China's Labor and Social Security Minister Tian Chengping warned that the employment situation in China in 2008 was expected to be -very severe," noting that towns and cities would be able to provide only 12 million new jobs.
167. Chinaview, September 27, 2008.
168. Global Insight, Country Intelligence Analysis, China, October 20, 2008.
169. China Xinhua News Agency, November 12, 2008.
170. Such a move would help keep U.S. interest rates relatively low. If China decided not to sharply increase its purchases of U.S. securities, U.S. interest rates could go up.
171. See CRS Report RL343 14, China's Holdings of U.S. Securities: Implications for the U.S. Economy, by Wayne M. Morrison and Marc Labonte.
172. Inside U.S. Trade, China Trade Extra, September 24, 2008.
173. For additional information, see CRS Report RS22984, China and the Global Financial Crisis: Implications for the United States, by Wayne M. Morrison.
174. People's Daily Online, February 19, 2009.
175. SOUTH KOREA: Seoul Faces Growth and Liquidity Tests, Oxford Analytica, October 8, 2008.
176. Lee Warns Against Dollar Hoarding, Korea Times, October 8, 2008.
177. See Merrill Lynch, "Asia: Risks Rising", October 3, 2008.
178. For more information about Pakistan's economic crisis, see CRS Report RS22983, Pakistan's Capital Crisis: Implications for U.S. Policy, by Michael F. Martin and K. Alan Kronstadt.
179. "Pakistan's Zardari to Give Up Powers," AFP, September 20, 2008.
180. Simon Cameron-Moore, -Pakistan Needs $ 10-15 Bln Fast, Says PM's Adviser," Reuters, October 21, 2008.
181. "IMF Okays $7.6 Bln Package for Pakistan: Tareen," Associated Press of Pakistan, November 15, 2008.
182. Jamie Anderson, "Pakistan Turns to IMF for Financial Aid," Money Times, November 16, 2008.
183. "Pakistan Unveils Package for Economic Stability," Reuters, September 19, 2008.
184. Farhan Bokhari, "Pakistan Vows to Target Rich Tax Evaders as IMF Concludes Talks on Vital Loan," Financial Times, November 3, 2008.
185. India Acts to Avert Liquidity Crunch, Financial Times, November 16, 2008
186. For an analysis of bubbles, see CRS Report RL33666, Asset Bubbles: Economic Effects and Policy Options for the Federal Reserve, by Marc Labonte.
187. Lanman, Scott and Steve Matthews. "Greenspan Concedes to 'Flaw' in His Market Ideology," Bloomberg News Service, October 23, 2008.
188. Soros, George. The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means (PublicAffairs, 2008) p. i. Soros proposes a new paradigm that deals with the relationship between thinking and reality and accounts for misconceptions and misinterpretations.
189. International Monetary Fund. "The Recent Financial Turmoil-Initial Assessment, Policy Lessons, and Implications for Fund Surveillance," April 9, 2008.
190. Gerstenzang, James. "Bush will Meet with G-20 After Election," Los Angeles Times, October 23, 2008.
191. G-20, Meeting of Finance Ministers and Central Bank Governors, United Kingdom, 14 March 2009, Communiqué, March 14, 2009.
192. The declaration from the Summit is in Appendix C.
193. Prepared by Dick K. Nanto and Martin A. Weiss. For further information see CRS Report RS22976, The Global Financial Crisis: The Role of the International Monetary Fund (IMF), by Martin A. Weiss.
194. Lipsky, John. "Global Prospects and Policies," Speech by John Lipsky, First Deputy Managing Director, International Monetary Fund, at the Securities Industries and Financial Markets Association, New York, October 28, 2008.
195. World Bank. "The Unfolding Crisis, Implications for Financial Systems and Their Oversight," October 28, 2008. p. 8.
196. See CRS Report RS22976, The Global Financial Crisis: The Role of the International Monetary Fund (IMF), by Martin A. Weiss.
197. Each member country of the IMF is assigned a quota, based broadly on its relative size in the world economy. A member's quota determines its maximum financial commitment to the IMF and its voting power. The U.S. quota of about $58.2 billion is the largest.
198. "IMF to Launch New Facility for Emerging Markets Hit by Crisis," IMF Survey Online, October 29, 2008.
199. Edwin Truman, On What Terms is the IMF Worth Funding, Peterson Institute for International Economics, December 2008.
200. "As Contingency, IMF Aims to Double its Lendable Resources," IMF Survey Magazine: Policy, February 2, 2009.
201. IMF Signs $100 Billion Borrowing Agreement with Japan, IMF Survey Magazine: In the News, February 13, 2009.
202. Bob Davis, "IMF Considers Issuing Bonds to Raise Money," Wall Street Journal, February 1, 2009.
203. See, for example, CRS Report RL34730, The Emergency Economic Stabilization Act and Recent Financial Turmoil: Issues and Analysis, by Baird Webel and Edward V. Murphy;
204. CRS Report RL34412, Containing Financial Crisis, by Mark Jickling;
205. CRS Report RL33775, Alternative Mortgages: Causes and Policy Implications of Troubled Mortgage Resets in the Subprime and Alt-A Markets, by Edward V. Murphy;
206. CRS Report RL34657, Financial Institution Insolvency: Federal Authority over Fannie Mae, Freddie Mac, and Depository Institutions, by David H. Carpenter and M. Maureen Murphy;
207. CRS Report RL34427, Financial Turmoil: Federal Reserve Policy Responses, by Marc Labonte;
208. CRS Report RS22099, Regulation of Naked Short Selling, by Mark Jickling; and
209. CRS Report RS22932, Credit Default Swaps: Frequently Asked Questions, by Edward V. Murphy.
210. U.S. Treasury, "PWG Announces Initiatives to Strengthen OTC Derivatives Oversight and Infrastructure," Press Release HP-1271, November 14, 2008.
211. For analysis and recommendations by the International Monetary Fund, see "Global Financial Stability Report, Financial Stress and Deleveraging, Macro-Financial Implications and Policy," October 2008. 246 p.
212. For information on Basel II, see CRS Report RL34485, Basel II in the United States: Progress Toward a Workable Framework, by Walter W. Eubanks.
213. For recommendations by the Financial Stability Forum, see "Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience, Follow-up on Implementation," October 10, 2008. 39 p.
214. International Monetary fund. "Global Financial Stability Report: Financial Stress and Deleveraging, Macrofinancial Implications and Policy" (Summary version), October 2008. pp. ix-x.
215. Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Office of Thrift Supervision. "Banking Agencies Reach Agreement on Basel II Implementation." July 20, 2007.
216. For details on U.S. implementation, see U.S. Federal Reserve, "Basel II Capital Accord, Basel I Initiatives, and Other Basel-Related Matters." http://www.federalreserve.gov/generalinfo/basel2/USImplementation.htm#Current.
217. See, for example, Caprio, Gerald, Jr., Ash Demirguc-Kunt, and Edward J. Kane, "The 2007 Meltdown in Structured Securitization: Searching for Lessons Not Scapegoats," World Bank Working Paper, September 5, 2008.
218. Tarullo, Daniel K. Banking on Basel, the Future of International Financial Regulation (Peterson Institute for International Economics, 2008). p. 5.
219. These are areas in which the Financial Stability Forum has made recommendations to the G7 Finance Ministers and central bank Governors on October 10, 2008. See "The Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience," April 7, 2008, 74 p.
220. Prepared by J. Michael Donnelly, Information Research Specialist, Knowledge Services Group. Source: Various news reports and press releases.
221. U.S. Treasury. "Joint Statement by Treasury, Federal Reserve and FDIC." Press Release HP-1206, October 14, 2008.