A communique that more or less acknowledged disagreement over the great bank taxes debate and a Canadian finance minister, Jim Flaherty, thinking that the debate was swinging Canada’s (anti-bank levy, pro-contingent capital) way. I think one of two things could happen at this point:
1. The US and Europeans who support the bank tax will keep pushing it at G20 level, perhaps soft-pedalling until after the Canadian-hosted G7/G20 summit in June and then resuming the campaign in the second half of the year.
2. As Secretary Geithner suggested tonight, the US might just forge ahead anyway and hope that the rest of the world follows behind once they see what a great idea it is. My notes (not precise quote) say: “We are going to move in the US and I suspect you will find when other countries see what we do, they are going to take similar measures”.
Not entirely sure that 2. is a sustainable option, since other countries might well think it is worth taking the risk of funding a bank bailout down the line to steal business from American and European banks now. Then again, Canadian banks aren’t particularly known for buccaneering adventurism in other developed country markets (some are quite big in emerging markets), so perhaps they are an exception that can be tolerated without too much risk of being undercut. Japan, on the other hand, another opponent of bank taxes, could be a different matter.
Other things worth highlighting from the communique and the post-match press conferences:
- Very little said about currencies. US evidently soft-pedalling. Mr Geithner so keen not to make news when commenting on the Chinese currency that he prefaced his remarks by saying that he was saying nothing new.
- Interesting that communique talks about capital rules as being the most important part of financial regulatory reform. Also underlined by Mr Geithner, who reportedly has something close to an obsession on the subject.
- Not much talk on Greece. Not mentioned by name in communique, questions on it to ministers from non-EU countries generally referred to EU/IMF. The Europeans are taking on a lot of reputational risk to themselves by assuming charge of this rescue.
- Some concern that countries are too optimistic about their own recoveries, and this is showing up in discussions within the G20 surveillance process. The import of this depends on what you think of yet another multilateral surveillance process. I am not a fan.
- Your intrepid blogger doing his best to get on a US Treasury blacklist by sardonic reference in Geithner press conference to the Canadians beating the US in the Olympic [ice] hockey, and comparison with bank tax debate. Awaiting reprisals.
That’s all for Friday night. More tomorrow.