One on One with Robert Hormats, Vice Chairman of Goldman Sachs International
Friday, November 14, 2008
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SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Joining us now for more analysis of the G20 meeting, Robert Hormats, vice chairman of Goldman Sachs international. Hi, Bob.
ROBERT HORMATS, VICE CHAIRMAN, GOLDMAN SACHS INTERNATIONAL: Good to be with you. Thanks for having me.
GHARIB: It seems that these world leaders are coming to the summit with lots of different expectations and different agendas and President- Elect Barack Obama is not even going to be there. So what can actually get done this week?
HORMATS: We can't expect miracles. The G-7 summits, which I was a (INAUDIBLE) before, took three sets of preparatory meetings over a period of six months to prepare and they were only seven countries, mostly like- minded. Now we have 20 countries. They're not at all like-minded at most things. They've only had a month to prepare and a lame-duck president. But they can do certain things. One, it would be good if a few of them announced that they were going to add to the stimulus commitments that they've already made and the United States is certainly developing plans like that. China has already announced some. Others might. We're not going to get any specifics on regulatory changes. I think they all know that regulations have not been adequate to deal with these types of issues, but the devil's in the details there. There may be some very broad statements. But the key will be in the follow- up.
The third thing is the follow-up itself. This meeting will not achieve miracles, but if it sets in place a number of working groups on regulation, on perhaps how to improve the trading system, how to improve the IMF, how to improve the World Bank, that could be very useful and give a good launching pad for the next administration. And, fourth, helping the poor countries that are not represented there, but are being hurt badly by this crisis.
GHARIB: As you know, Bob, there has been a lot of chatter about some kind of big, single, global regulator to oversee this financial crisis. Do you see this meeting as maybe laying the foundation or the ground work for something like that?
HORMATS: There will be big differences over that issue. President Bush has indicated that he was reluctant to go along with one new, global regulator. Canada has more or less said that it did not think that was a good idea. The Chinese and many emerging economies are going to be very reluctant to do this. But I think there can be better regulatory coordination. And they might use something like the financial stability form which enables central banks and other officials to work together to improve regulations, not one regulator, but working together in a mutually acceptable way and consistent way to improve domestic regulations and make sure that things don't fall between the cracks internationally. Strengthening that group could be done and would be very useful.
GHARIB: So what do investors need to hear on Monday from this summit that they feel more positive about the markets?
HORMATS: The first thing they want to hear is that they're working together. One of the big problems in the 1930s that made the depression a lot worse than it otherwise would have been, is that there was competitive exchange rate devaluation, protectionism and cacophony among these countries. We also had that problem in the 1980s when there were big disputes for instance between the United States and Germany. They want to see these countries working together and just like the Hippocratic oath "do no harm." Work together and show that they can cooperate and second, launch a number of working groups that are going to pull officials together over the next several months to address these problems. And, third, have another summit down the road so that they just don't talk and have working groups, but the heads of state pay attention to this. And, fourth, that they go home saying we're recommitted to doing what it takes to stimulate our economies because this is going to be a much worse situation unless there is adequate government response here.
GHARIB: A lot that they have to do and we have run out of time. But thank you very much, Bob for coming on the program.
HORMATS: Thanks for inviting me.
GHARIB: My guest tonight, Robert Hormats, vice chairman of Goldman Sachs International.
