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O 012151Z APR 09
FM SECSTATE WASHDC
TO ALL DIPLOMATIC AND CONSULAR POSTS COLLECTIVE IMMEDIATE

UNCLAS STATE 031659 
 
 
E.O. 12958: N/A 
TAGS: ECON EFIN KPAO
SUBJECT: KEY THEMES AND FACT SHEET ON LONDON G20 SUMMIT 
 
REF: (A) 08 STATE 134465 (B) 08 STATE 113810 
 
¶1. (U) This cable provides key themes and messages for 
posts' use in commenting on  the April 2 London Summit. 
A detailed fact sheet outlining U.S. goals and 
objectives for the Summit is reproduced at para 3 below. 
The fact sheet has already been released to the U.S. 
press and may be distributed at post. 
 
¶2.  (U) For updated press statements, public remarks, 
and other information related to the Summit, posts 
should refer to Infocentral. 
 
KEY MESSAGES 
------------ 
 
-- As the President has emphasized, we face a global 
financial and economic crisis which requires a 
coordinated global response. 
 
-- The G-20 countries must take bold, comprehensive and 
coordinated action on two key fronts - first to restart 
global growth now, and secondly to reform the 
supervisory and regulatory framework so that similar 
crises do not happen again. 
 
-- For our part, the United States has taken dramatic 
and unprecedented action to put our own economic house 
in order - by approving a far-reaching economic stimulus 
package, by taking steps to stabilize our financial 
system and restart the flow of credit, and by 
comprehensively reforming our supervisory and regulatory 
structure. 
 
-- To assist those countries hit hard by the global 
crisis, the United States and its global partners are 
moving to significantly increase the resources available 
to the international financial institutions. 
 
-- We also strongly support modernizing the governance 
of the IFIs to better reflect the realities of today's 
world economy. 
 
-- Open markets for trade and investment have been a key 
driver of world prosperity, and we must resist the 
temptation of protectionist measures and economic 
nationalism as we fashion a response to the crisis. 
 
-- As this crisis unfolds, we must also pay attention to 
the special needs of the poorest.  The United States 
remains committed to ensuring that the multilateral 
development banks and the IMF have the sufficient 
resources to fulfill their missions, and to substantial 
increases in our own national programs. 
 
 
FACT SHEET ON THE LONDON ECONOMIC SUMMIT 
---------------------------------------- 
¶3.  (U) The Fact Sheet below was developed by the 
Treasury and can be used to explain U.S. goals and 
objectives going into the April 2 Summit.  It was 
released to the press on March 31 and may be distributed 
at post. 
 
Begin text: 
 
President Obama and world leaders will gather in London 
representing more than 20 countries and more than 85 
percent of the global economy.  At no time since World 
War II have world leaders come together in the same way 
to address economic challenges and the international 
financial system.  With global income set to decline for 
the first time in 60 years and unemployment rising in 
nearly every country, this is a global crisis and it 
requires a coordinated global response. 
 
During the course of the meeting, Leaders will discuss 
the path to global growth and recovery and efforts to 
avert future crises of this magnitude.  The G-20 
countries together must take aggressive action on two 
fronts - first to ensure economic recovery and restart 
global growth and second to reform the supervisory and 
regulatory framework to prevent economic crises from 
occurring in the future while encouraging innovation and 
growth.  These policies will affect the economic well- 
being of the world's population for generations to come. 
For our part, the Obama Administration has taken 
decisive action to stimulate domestic economic growth, 
restore the health of our banks, provide credit to 
households and businesses, and develop a regulatory and 
supervisory structure to ensure such a crisis never 
happens again. 
 
Improving the health of the U.S. economy is good for the 
world, just as a robust global economy is necessary to 
support U.S. exports, jobs, and growth at home. 
Moreover, export growth was responsible for half or more 
of U.S. economic growth in the first three quarters of 
¶2008.  These exports depend crucially on economic growth 
in our trading partners, as the economies of our trading 
partners have faltered, our exports have declined. 
Increasingly, our exports are going to emerging markets 
- markets that have been hard hit both by the global 
downturn and by a decline in international lending. 
Against this backdrop, the United States is taking 
concerted actions to jumpstart growth, promote financial 
stability, and lay the groundwork for financial sector 
reform both here at home and abroad. 
 
KEY OBJECTIVES OF THE SUMMIT 
 
-- Renewing our commitment to coordinated and 
comprehensive action to boost demand and jobs and to 
take whatever action is necessary until growth is 
restored. 
-- Acting forcefully to fix the financial system to get 
lending moving again. 
-- Discouraging protectionism and economic nationalism. 
-- Ensuring sufficient resources and tools to address 
the impact of crisis on emerging markets and developing 
countries, including the poorest. 
-- Ensuring that all systemically-important financial 
firms and products are subject to strong oversight. 
-- Taking action to strengthen international standards 
for weakly-regulated jurisdictions in the prudential, 
tax haven, and money laundering areas. 
-- Adopting a robust international regulatory framework 
to prevent crises of this kind from occurring again. 
 
 
A STRONG RECORD AT HOME 
 
The United States has taken a leading role in supporting 
economic growth and regulatory reform. 
 
-- The American Recovery and Reinvestment Act, passed by 
Congress and signed into law by President Obama in 
February will inject $787 billion into the economy over 
the next two years, creating or saving 3.5 million jobs. 
 
-- The Federal Reserve has lowered the federal funds 
rate target to near zero and substantially expanded its 
balance sheet to lower the cost and increase the 
availability of credit in the economy. 
 
-- The Treasury Department has developed a Financial 
Stability Plan with detailed programs to address the key 
problems at the heart of the current crisis: 
 
(a) Assessing banks' need for an extra capital cushion 
in the face of a worsening economy and providing them 
with access to capital through the Capital Assistance 
Program. 
 
(b) Buying up troubled assets weighing down bank balance 
sheets through a Public Private Investment Program, 
allowing banks to raise private capital and increase 
lending. 
 
(c) Addressing falling housing prices through a mortgage 
refinancing and modification program that will help up 
to 9 million Americans stay in their homes. 
 
(d) Unlocking frozen credit markets through a Consumer 
and Business Lending Initiative to jumpstart new auto, 
credit card and student loans. 
 
-- The Administration has put forward a framework for 
regulatory reform with new rules of the road to deal 
with systemic risk, protect consumers and investors, 
eliminate gaps in our regulatory structure and foster 
international coordination. 
 
(a) Under the plan, financial products and institutions 
will be regulated for the economic function they provide 
and the risks they present, not the legal form they 
take.  For example, for the first time, hedge funds 
above a modest size will now need to register with the 
Securities and Exchange Commission to ensure that we 
monitor and contain the risk they pose to the financial 
system. 
 
(b) The plan also recognizes that markets are global and 
high standards at home need to be complemented by strong 
international standards enforced more evenly and fairly. 
 
A CALL FOR GLOBAL RESPONSE 
 
Economic Recovery 
 
The Group of Twenty countries have adopted policies to 
restore growth and improve the health of their financial 
systems and have committed to do what is necessary to 
restore growth.  Representing 85 percent of the global 
economy, significant actions from the G-20 to stimulate 
demand and stabilize markets has ramifications across 
the world.  G-20 actions include: 
 
-- Fiscal stimulus packages aimed at boosting employment 
and income. For example, China has announced a stimulus 
plan of 2.0 percent of its GDP for 2009 and Saudi Arabia 
has a stimulus plan for 2009 representing 3.3 percent of 
its GDP. 
 
-- Interest rates have been cut aggressively in most 
countries, and G-20 central banks will maintain 
expansionary policies as long as needed, using the full 
range of monetary policy instruments, including 
unconventional policy instruments, consistent with price 
stability. 
 
-- Financial sector policies to protect the deposits of 
households and restore the operations of credit markets. 
 
-- Measures to improve the health of the financial 
sector through continued liquidity support, bank 
recapitalization, and removing impaired assets from bank 
balance sheets. 
 
An increase in international support is necessary to 
help the Emerging Markets recover from the crisis.  Many 
emerging markets escaped the initial effects of the 
financial crisis but are now been hard hit by the 
contraction in the advanced economies.  Recognizing the 
considerable risk to global growth should emerging 
markets continue to falter, the Leaders have committed 
to unprecedented support for the international 
institutions to ensure they have sufficient resources to 
help stem the deepening of the crisis.  And as emerging 
and developing economies contract so do their imports of 
U.S. goods and services.  This downturn is made more 
challenging because countries that used to be able to 
borrow on capital markets are finding it more difficult, 
requiring them to turn to the international financial 
institutions for assistance.  The G-20 will be exploring 
a number of mechanisms for expanding resources available 
to emerging markets and developing countries: 
 
-- International Monetary Fund/New Arrangements to 
Borrow (NAB):  The United States has called for a 
significant increase in NAB resources and expanded 
participation to include more G-20 countries.  The New 
Arrangements to Borrow is a 1998 agreement by 26 IMF 
member countries to provide billions in supplemental 
lending resources to the IMF to use in case of crises; 
current NAB resources total $50 billion. 
 
-- International Liquidity/Special Drawing Rights (SDR) 
Allocation: Special Drawing Rights (SDRs) are reserve 
assets that only the IMF can create and whose valuation 
is based on a basket of key currencies (the US dollar, 
the euro, the yen, and sterling).  The G-20 will 
consider an allocation of SDRs, which could provide 
supplemental liquidity to help emerging market and 
developing countries in particular cope with the impacts 
of the crisis. 
 
-- Trade Finance: The current decline in trade volumes 
is attributable to the economic decline and frozen 
financial markets, which has impeded the availability of 
short-term trade finance in private markets.  To help 
facilitate trade flows, the G-20 members and 
multilateral development banks will work to ensure the 
availability of short-term trade financing over the next 
two years, through a variety of national and 
multilateral mechanisms. 
 
-- Financing from the multilateral development banks 
(MDBs), such as the World Bank, can be instrumental in 
helping countries continue to finance health, education, 
and infrastructure projects during a time of budget 
shortfalls.  These resources are also critical for the 
poorest countries that have made significant inroads in 
improving growth rates and increasing access to health 
and education.  The G-20 will call for a significant 
expansion of the financial commitments of the MDBs. 
 
-- Aid to the Poorest:  The G-20 will explore financing 
mechanisms specifically targeted at the needs of low 
income countries. 
 
FINANCIAL REFORM 
 
To avert another crisis, the Leaders will also need to 
reshape how we cooperate on financial issues 
internationally.  In recent weeks, we have made progress 
on enhancing regulatory cooperation that will improve 
understanding of the risks in other economies and 
provide a common framework for addressing risks as they 
arise.  In line with good corporate governance, we must 
also ensure that our international financial 
institutions are well governed with representation 
increased for dynamic emerging markets. 
 
INTERNATIONAL REGULATORY COOPERATION AND CRISIS 
PREVENTION 
 
-- Financial Stability Forum:  The United States took 
the initiative to expand the Financial Stability Forum 
(FSF) to all G20 members, strengthen its mandate, and 
elevate it to serve alongside the IMF, World Bank and 
World Trade Organization (WTO) as a strong institution 
leading efforts to create a more robust framework of 
standards for the global financial system. 
 
-- Weakly-regulated jurisdictions:  The G20 is taking 
strong action to strengthen the implementation of 
international standards by offshore financial centers. 
 
-- Counter-cyclical measures:  U.S. regulators have 
played a leading role in an FSF effort to agree on the 
importance of financial institutions building up capital 
in good times to use in bad times, but we have agreed 
that now is not the time to raise capital requirements. 
 
-- Crisis management:  We have agreed to embrace the 
FSF's international crisis management recommendations, 
including the need to develop a common set of tools, 
improve information sharing, and remove practical 
barriers to cooperation. 
 
-- Supervisory colleges:  "Supervisory colleges" for at 
least 25 of the 30 systemically-important financial 
firms have already met, which facilitates information 
sharing among the most relevant regulators in those 
countries most significant for the health of the 
financial firms. 
 
-- Compensation principles: We have agreed to the FSF's 
Principles for Sound Compensation Practices, which are 
intended to align compensation with risk taking at 
significant financial institutions. 
 
IFI GOVERNANCE 
 
Governance of the international financial institutions 
(IFIs) must be modernized to enhance their legitimacy 
and effectiveness, and to reflect today's world economy. 
Dynamic emerging markets must have greater 
representation. 
 
-- The U.S. is advocating for an acceleration of the 
completion of the next review of IMF quotas to January 
2011 in order to see a further shift in voice and vote 
to emerging market and developing countries. 
 
-- We support aligning the governance reform process at 
the World Bank with that of the IMF. 
 
-- The U.S. believes the full range of governance issues 
should be addressed, including reform of the IMF 
Executive Board. 
 
 
End fact sheet text. 
 
 
CLINTON