More 'new tools and resources' ? Just like in 2003?

G7 outlines broad but vague plan to combat crisis

By Greg Robb, MarketWatch
Last update: 8:28 p.m. EDT Oct. 10, 2008Comments: 942WASHINGTON (MarketWatch) -- Treasury Secretary Henry Paulson laid out more details of his radical plans to buy equity in banks Friday, while the Group of Seven finance ministers and central bank governors urged its members to take whatever steps are necessary to restore market confidence.

After their closed-door meeting Friday, the G7 set out a broad "plan of action" to stabilize global financial markets, in a one-page plan that was sweeping in scope but short on specifics. G7 outlines broad but vague plan to combat crisis

By Greg Robb, MarketWatch
Last update: 8:28 p.m. EDT Oct. 10, 2008
Comments: 942
WASHINGTON (MarketWatch) --

Treasury Secretary Henry Paulson laid out more details of his radical plans to buy equity in banks Friday, while the Group of Seven finance ministers and central bank governors urged its members to take whatever steps are necessary to restore market confidence.

After their closed-door meeting Friday, the G7 set out a broad "plan of action" to stabilize global financial markets, in a one-page plan that was sweeping in scope but short on specifics.

Robert Brusca, chief economist at FAO Economics, called the statement "fluff - good fluff but fluff."

Vincent Reinhart, a former top staffer at the Federal Reserve Board, said markets had no interest in pledges but wanted to know exactly what the G7 would do before trading resumes Monday.

Reinhart said the financial markets are moving quickly, which makes the gears of international economic policymakers seem to move more slowly.
"I think the finance ministers just failed a test, or at best got a C minus," said Paul Krugman, a Princeton University economics professor and New York Times columnist.

But Sherry Cooper, chief economist at BMO Capital Markets, said she thought the principles expressed by the G7 would reassure markets.

Economists have said they wanted the G7 to agree on measures including sweeping guarantees of bank deposits and interbank lending, as well as direct injections of taxpayer money to recapitalize ailing banks.

"They have to deliver the goods because the markets are just not going to stabilize unless they do," said Brian Hilliard, head of economic research at Societe Generale. "And the goods are government guarantees of deposits."

Ahead of the meeting, Ken Rogoff, a Harvard University professor and former chief economist at the International Monetary Fund, said there needed to be an "overwhelming" G7 statement.

"I think the worst thing to do would be to come out with a very tepid response," he said. "It would be the end of the G7."

"This is really the mother of all financial crises since World War II, and if the G7 leaders can't ... get it together and come out with a very effective statement, it is going to be a sad day indeed," Rogoff said.

With global equity markets plunging, the odds of coordinated action "are increasing by the hour," Hilliard said. "The gravity of the situation is just obvious to everybody."
Greg Robb is a senior reporter for MarketWatch in Washington.