As has long been the case with the Group of Seven rich countries, the US attitude is likely to be the most important factor in what the G20 decides in a month’s time.
With Congress in a fractious mood, having repeatedly been asked for money to bail out the financial system and boost the US economy, the White House’s room for manoeuvre in signing up to grandiose new plans for global regulation is strictly limited.
Before getting to the international dimension, there are differences of opinion within Congress even about whether the Federal Reserve ought to take on an overarching regulatory role in assessing the overall risk to the national economy.
Barney Frank, chairman of the House financial services committee, thinks it should; Chris Dodd, his counterpart on the Senate banking committee, has been sceptical. So officials and experts say the chance that the US would leapfrog straight to a system of global regulation is very small.
There will be some room for agreement elsewhere. White House officials, concerned that the US stimulus spending will leak out of the economy to support growth elsewhere rather than create US jobs, support globally co-ordinated fiscal action.
And this week Tim Geithner, the US Treasury secretary, told Congress he would be supportive of moves to crack down on offshore tax havens – a stance that Lawrence Summers, Barack Obama’s senior economic advisor, has championed for some time.
But the Obama administration has yet to formulate detailed positions on the G20 summit. Michael Froman, the US “Sherpa”, will attend Thursday’s preparatory meeting in London and gather views on what the other participants hope to get out of the summit.
Perhaps Washington’s biggest concern is to build defences against the contagion that would result from the failure of a large bank elsewhere in the world, whether in Europe or Asia. American officials worry that many European countries, such as Switzerland and the Netherlands, are host to banks that have assets larger than their home country gross domestic product. Iceland, in other words, may only be the thin end of the wedge.
The Obama administration is likelier to be more supportive of steps to reweight the country share-holdings in the International Monetary Fund – not least because the US itself, despite a widespread perception that it dominates the IMF, is in fact under-represented on the fund’s executive board relative to its size in the global economy.
The White House is keen to compile a list of international best practices on issues such as the regulation of non-bank financial institutions, the role of credit rating agencies and the regulation of over-the-counter derivatives. But US officials are adamant that Washington will not sign away any regulatory sovereignty.