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G-20 Eyes Deal On Bank Reserves

ROBERT SIEGEL, host:

Economic developments at the G-20 were overshadowed by the Iran news, but the G-20 leaders who met last night at dinner and all day today in Pittsburgh issued a final statement this afternoon outlining a number of economic reforms.

NPRs John Ydstie now joins us to talk about them. Hi, John.

JOHN YDSTIE: Hi, Robert.

SIEGEL: I guess the big news here is the decision by the G-8, the group of eight wealthy nations, to pass the baton to the G-20 meeting - the responsibility for monitoring the world economy now rests with the bigger group.

YDSTIE: Thats right. In their communique, the leaders say we designate the G-20 to be the premier forum for international economic cooperation. And even if that might seem a little self-serving, remember the G-20 represents about 90 percent of the global economy and about two-thirds of the worlds people. Most importantly, this officially gives emerging powers like China, India and Brazil a place at the table, where global economic policies are developed.

In a written statement announcing the shift this morning, the White House said this decision brings to the table the countries needed to build a stronger more balanced global economy, reform the financial system and lift the lives of the poorest.

SIEGEL: So is it for the G-8? Can we say good-bye to that group?

YDSTIE: Well, my understanding is that G-8 will continue to function, but it will not be viewed as the top global economic decision-making group which it has been since way back in the 1970s.

SIEGEL: Now one big issue in the headlines before this G-20 Summit was a call for a cap on bamkers bonuses called by French President Nicolas Sarkozy. What did the leaders decide about that?

YDSTIE: Well, they didnt go along with Mr. Sarkozy on caps, but they did issue some recommendations on compensation in the financial world. The aim is to try to eliminate practices that encourage the big risk taking that helped spark the financial crisis. He called for a ban on multi-year bonus guarantees and even (unintelligible) back pay if deals or investments go back. And if banks have low capital, limiting bonuses to a percentage of the capital.

SIEGEL: Speaking of capital, what about the cushions that banks hold against losses? Any progress enforcing banks to increase those capital cushions?

YDSTIE: Not a lot of progress there. The leaders did urged banks to set aside more capital by the end of 2012. But they put off coming up with specific triggers until the end of next year. So we got a timetable, but no hard figures.

SIEGEL: Now, another big U.S. goal at this summit was to get China and other big exporting countries to export less and consume more at home, while the U.S. starts saving more and perhaps consuming less. Anything new on that front?

YDSTIE: Well, the leaders endorsed whats called a framework for strong sustainable and balanced growth. And that framework will be used to make the kind of changes you just mentioned. The idea is to avoid the big imbalances in the global economy that contributed to the financial crisis.

There was concern China might not sign up for this because it feared that it might not grow fast enough if it had to depend more on internal growth instead of exports. But China appears to have gone along with the deal. One caret was the endorsement by the leaders of a plan to give emerging economies, mostly China, a bigger voting share at the International Monetary Fund. The plan calls for rich countries, specifically in Europe, to give up 5 percent of their voting rights to the emerging nations.

SIEGEL: Thank you, John.

YDSTIE: Youre welcome, Robert.

SIEGEL: NPRs John Ydstie joining us from Pittsburgh. So who is in the G-20? Some members are obvious, some not so. You can test your G-20 IQ. at the Two-Way, NPRs news blog. Go to npr.org/two-way. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.
Prior to his retirement, Robert Siegel was the senior host of NPR's award-winning evening newsmagazine All Things Considered. With 40 years of experience working in radio news, Siegel hosted the country's most-listened-to, afternoon-drive-time news radio program and reported on stories and happenings all over the globe, and reported from a variety of locations across Europe, the Middle East, North Africa, and Asia. He signed off in his final broadcast of All Things Considered on January 5, 2018.
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