G20 Breakdown

The G20 wants financial reform in June. Wall Street too.

In fact, everybody wants reform. Obama does,and the Conservative Canadian government sees it the means to deal with financial problems. Much-beleagered Goldman Sachs is on board as well: “We believe that sensible and significant reforms that do not impair entrepreneurship or innovation, but make markets more efficient and safer, are in everyone’s best interest,” write CEO Lloyd Blankfein and company President Gary Cohn.

But the real question is – what do they mean by ‘reform’ i.e. what form will it take? And what do they want left out?

An article from Rob Weissman at Public Citizen helps in understanding the approach taken by governments and the financial industry in attempting deal with financial problems and attempting to build the regulatory system.

Weissman suggests that Wall Street wants to: “Confine the debate to technical issues and traditional regulatory questions. Prevent consideration of industry structure and incentives. Protect the ability of firms to undertake high-stakes gambling.”

What needs to happen that isn’t happening? According to Weissman:
1. A strong and independent Consumer Financial Protection Agency
2. Break Up the Banks
3. Clamp Down on Out-of-Control Pay
4. End the Casino Economy
5. No Global Deregulation

So when you hear government calling for regulatory reform, we all should be asking ‘what kind and in whose interest?’

There is an excellent petition going around in advance of the meetings in Toronto calling on the G20 to end the pattern of stolen money and tax evasion from corrupt government officials and corporations who hide ill-gotten gains through tax havens and secret jurisdictions. They state that for every dollar in aid that goes to poorer countries, 10 dollars comes out in the form of these corrupt gains that are not properly tracked.

Watch their clear and informative campaign video here and check out their website (Global Financial Integrity) for excellent in-depth information on the problem of tax evasion and other illicit forms of corruption.

While transparency is not the only answer to making the global economy fairer to the poorer countries that are hurt by this, it is certainly a step in the right direction. At this point, the G20 appears unlikely to properly take the issue up, but public pressure may build on them

From the petition:

Research shows that developing countries are losing $1 trillion every year due to crime, government corruption, and tax evasion. These illicit monetary outflows are roughly ten times the amount of aid money going into developing countries for poverty alleviation and economic development.

The loss of money from poor economies that would otherwise go to provide health services, infrastructure, and other critical needs exacerbates poverty and leads to the deaths of millions of people. The annual loss of hundreds of billions of dollars from the world’s poorest and most vulnerable economies constitutes one of the most pressing human rights issues of the new decade.

The key to tackling this problem is transparency in the global financial system. After these stolen or otherwise ill-gotten gains exit their country of origin they vanish into an opaque financial system comprised of tax havens and secrecy jurisdictions. The most effective deterrent to criminals, corrupt officials, and tax evaders is to create a global financial system where illicit money cannot hide.

When the world’s 20 largest economies – the G20 – meet in Toronto on June 26-27, 2010 they will have an unprecedented opportunity to institute changes to create a transparent global financial system that is open, accountable, fair and beneficial for all.