[stop-imf] Strauss-Kahn: Need for govt intervention to address financial crisis

[robert weissman]

    Strauss-Kahn calls for "public intervention" to respond to the
    global financial crisis. Will he permit developing countries the
    right to the same government intervention to build their economies?



    http://www.ft.com/cms/s/0/15a40416-043a-11dd-b28b-000077b07658.html


    Financial Times


    IMF head calls for global help on turmoil

By Krishna Guha in Washington

Published: April 7 2008 03:00 | Last updated: April 7 2008 03:00

Government intervention at a global level is required to tackle the
credit crisis, according to the head of the International Monetary Fund,
who has warned that market turmoil will take its toll on world growth.

Dominique Strauss-Kahn, IMF managing director, told the Financial Times:
"I really think that the need for public intervention is becoming more
evident."

Government intervention - whether in the securities market, the housing
market or the banking sector - would act as a "third line of defence"
supporting monetary and financial policy, he said.

The controversial call comes days before world finance ministers and
central bank governors meet in Washington DC for the spring meetings of
the IMF and World Bank. Policymakers will discuss the credit crisis and
steps to address it.

Alistair Darling, the chancellor, in a letter to be sent ahead of the
meetings, will today call on his fellow finance ministers for a "clear
and detailed plan of action" to calm the markets, describing the
situation as "one of the strongest financial shocks for decades".

Authorities, particularly in the US, have taken increasingly aggressive
measures to support market liquidity but not intervened in the financial
system - with the exception of the rescues of Bear Stearns last month
and Northern Rock in the UK.

In recent months finance ministries and central banks have been
exchanging ideas behind the scenes on possible interventions as part of
contingency planning. Most policymakers, including those in the eurozone
and the US, do not believe broad public intervention is yet necessary.

Mr Strauss-Kahn's call will increase pressure on them to act. The
Institute of International Finance, an association representing big
banks, last week said there was a "growing case" for government
intervention.

Mr Strauss-Kahn, a former French finance minister, rejected the notion
that the credit crisis was largely a US problem. "The crisis is global,"
he said. "The so-called decoupling theory is totally misleading."
Developing countries such as China and India would be affected.

He said that banking crises in Japan and other nations, including
France, offered insights into how to tackle the turmoil. "There is a
general idea that you should find a way to disentangle the good assets
from the bad assets."

Intervention would tackle the housing and credit problems. "Effort has
to be made on loan restructuring. With respect to the banks, if capital
buffers cannot be repaired quickly enough by the private sector, use of
public money can be examined."

Many banks outside the US were holding dollar denominated assets,
including ones linked to US credit markets, he said. "So even if this
problem started in the US, the question of having a solution goes beyond
the US."

The IMF would this week reduce its global economic forecasts, Mr
Strauss-Kahn added.