One on One with Robert Hormats, Vice Chairman of Goldman Sachs International
Friday, March 27, 2009
|
|
|
|
SUSIE GHARIB: President Obama makes his first overseas trip as president next week. He starts in London on Wednesday night, meeting with the heads of the world's largest nations for an economic summit of the so-called group of 20. Joining us now for a preview of what to expect, Robert Hormats, vice chairman of Goldman Sachs International. Hi, Bob.
ROBERT HORMATS, VICE CHAIRMAN, GOLDMAN SACHS INTERNATIONAL: Hi, Susie, good to be with you.
GHARIB: So this is a really big meeting. What's the most important thing that the president needs to accomplish?
HORMATS: This is a great opportunity for the president to demonstrate leadership. He's done a great deal at home to resolve this problem and he can do a lot by helping other countries to come together to deal with it globally. There are two things they have to deal with. One are to address the current crisis and, two, to take measures to prevent a recurrence of a crisis like this in the future.
GHARIB: Now, President Obama and Treasury Secretary Geithner have been saying repeatedly that the U.S. needs other big countries to work with us to solve this financial crisis. Do you think that the Europeans are doing enough, that China is doing enough and can President Obama persuade them to do more?
HORMATS: Well, China is certainly doing a great deal. They've done a lot already. They have a big stimulus program under way and they've indicated they would do more if need be. I think the Europeans have done a considerable amount. Whether they've done enough I think depends on their own circumstances and they have different problems at home. They have very leveraged, highly leveraged banks. Their economies are weakening and they may decide on their own that they may need to do more in terms of fiscal stimulus and monetary policy. I don't think he can force them to do it but I think he can encourage them to do it by underscoring what we've done and the fact that in the middle of a crisis like this you have to do a lot, perhaps sometimes more than you originally anticipated.
GHARIB: But we have been hearing comments from a lot of European leaders that they really don't want to do more government spending. They want to avoid deficits. There have been hints of protectionist talks. If we don't get cooperation from these other countries, does that threaten the U.S. recovery?
HORMATS: It doesn't threaten U.S. recovery, but it makes it a bit more difficult because before this crisis, exports were about 10 percent of our GDP and Europe and other parts of the world are big markets for the U.S. So if these countries don't recover in a robust fashion, it certainly has an adverse effect on our exports and therefore, on our economy. And I think he will encourage them to do more. They say that they've got these built-in stabilizers like unemployment compensation and other things which are larger, more generous than ours and therefore, they don't need to do as much stimulus because those will provide additional benefits and additional spending power. But there's a debate. I think they'll work it out and not have a confrontation over this.
GHARIB: Now Bob, the topic of regulatory reform has been going on this week in Washington. It's also going to be a topic in London at this economic summit. Do you think that they'll make any progress on consensus for some kind of global standards for regulation of the financial industry?
HORMATS: Yes. They won't set up a new institution, but I think they can set up common guidelines that emphasize additional transparency, increasing capital adequacy for banks, an over-arching regulator or college of regulators to look at large institutions and to deal with broad, systemic risk and underscoring the importance of the financial stability fund that's been created to have members of their Treasury, the central banks of the world, including the Fed and stock regulators. If they work together collectively, they can avoid these crises and help to work together for common regulatory standards.
GHARIB: We just have 30 seconds left. I want to ask you quickly. Do you think any news or comments are going to come out of this summit that will give investors and consumers any confidence about the future of our economy?
HORMATS: Yes, I do. I think the fact that these countries are getting together and will come up with some broad sense of direction on what they should do to stimulate their economy, how they can work together on improving regulation, both now and in the future and also, to avoid protectionism. Markets are going to watch that very carefully and I think there will be not only strong statement to protectionism but some monitoring by the IMF or the World Bank to identify countries that do impose protectionist pleasures. Yes I think there will be a positive message, not dramatic breakthroughs but sound progress that the market should welcome.
GHARIB: We have to leave it there. Thank you, thank you so much for coming on the program, Bob.
HORMATS: Thank you.
GHARIB: My guest tonight Robert Hormats, vice chairman of Goldman Sachs International.
