The Managing Director of the International Monetary Fund (IMF), Dominique Struass-Kahn, has welcomed a $700 billion rescue plan for the United States of America financial markets, to “put out the fire” engulfing the banking system, but said a broader global solution to the crisis was needed.
According to IMF Managing Director, the plan should be a first step towards reform of the global financial system, and called for greater regulation of financial institutions and markets.
“It's because there were no regulations or controls, or not enough regulations or controls, that this situation was born. We must draw conclusions from what has happened - that is to say regulate, with great precision, financial institutions and markets,” he said.
Strauss-Kahn said the plan was a welcome one, because of its comprehensive nature, but said it must be the first step of international political action.
He said the IMF would be happy to coordinate the global reform process, which would begin next month, when finance ministers and central bankers convene in Washington for the annual IMF/World Bank on October 11-13.
“Without the will to reform, there was a danger that the state would be seen as running to the rescue of incompetent managers and greedy speculators,” he said, noting the criticism in parts of Europe, about banking profits being privatized, but their losses being nationalized.
Defending the IMF's role in the crisis, Strauss-Kahn said the Fund had estimated in April that there would be $1 trillion in financial sector losses, and had predicted a sharp slowdown in the global economy.