Obama and Brown

Brown, Obama attempt to halt financial slide | smh.com.au

THE British Prime Minister, Gordon Brown, and the US President, Barack Obama, were due to meet overnight in a renewed effort to prevent a global depression, as sharemarkets touched new lows amid fears of a deepening financial crisis.

Top of the agenda during the first meeting between the two men since Mr Obama assumed office was to be hammering out an international action plan for the London meeting of the Group of 20 nations next month.

Mr Brown has said he wants the 20 largest economies to agree to a "global new deal" involving much more co-ordinated efforts to stabilise and regulate the teetering world financial system.

Mr Brown was to press Mr Obama to back plans for an international college of supervisors to monitor the activities of multinational banks and for action against tax havens. "We want to ensure there are no regulatory gaps," a Downing Street spokesman said.

Mr Obama was likely to be highly receptive to at least the second idea, having last year campaigned vigorously against tax havens.

But how far he would go on global regulation remained to be seen. Mr Obama has established his own taskforce to overhaul the US financial regulatory system, and he has strongly criticised the performance of US regulators.

However, he faces his own domestic challenges in tightening financial oversight as it will require legislation, and he needs Republican support in Congress.

The Guardian reported that Mr Brown would use a speech to Congress to admit failings in Britain for which he held some responsibility.

He would also focus on the need to create green jobs, a theme that has been taken up by Mr Obama in his 2010 budget, to be presented to Congress soon.

The outcome of the talks between the two leaders will be important in restoring confidence in the short term. Fears of a new wave of financial instability were sparked on Monday as the giant American Insurance Group reported a history-making $US61.7 billion fourth-quarter loss.

The company has received an extra $US30 billion in assistance from the US Government, which has also relaxed the terms of an earlier bail-out of $US150 billion.

Despite repeated questions, a White House spokesman, Robert Gibbs, refused to say whether this was the last assistance that would be necessary to keep the insurance giant afloat. "The President has said that we'll take steps to ensure that there's not an economic catastrophe," he said.

AIG's problems stem from insurance written on credit default swaps and other derivatives. But a collapse of the group would cause dislocation throughout the world economy because it would throw into doubt all manner of insurance policies, from business and personal insurance to large policies covering the operations of big companies.