LONDON, September 22, 2008 (AFP) – IMF managing director Dominique Strauss-Kahn welcomed Tuesday the “bold steps” taken by the United States to stabilise the financial system, but warned global steps were required to get past the crisis.
“I welcome the bold steps being taken in the US and look forward to their effective implementation,” the International Monetary Fund chief wrote in the Financial Times, as Congress debated the US Treasury’s proposed 700-billion-dollar bailout for the banking industry.
“Other advanced economies should also be preparing comprehensive contingency plans.”
Strauss-Kahn said providing liquidity, acquiring bad assets and injecting capital into financial institutions would help with the fall-out from the crisis, and expressed confidence that “financial systems that had grown too large relative to the economy will stabilise at a more appropriate level”.
But in the longer term, he warned “substantial fiscal adjustments may be required” to deal with the costs of such action, while there was a bigger structural issue that must be dealt with on a global basis.
“This crisis is the result of regulatory failure to guard against excessive risk-taking in the financial system, especially in the US.