{ "title": "The Triple Comeback -- the Impact of the Financial Crisis on Global Economic Governance", "publication": "IMF News, December 8, 2010", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp120810", "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp120810", "overlayPath": "/en/news/articles/2015/09/28/04/53/sp120810/index.md", "summary": "Speech by Dominique Strauss-Kahn, Managing Director, International Monetary Fund.", "authors": [ "Dominique Strauss-Kahn" ], "publishDate": "2010-12-08", "sections": [ { "heading": "Overview", "content": "- Speech by Dominique Strauss-Kahn, Managing Director, International Monetary Fund.\n- Geneva, December 8, 2010. As prepared for delivery.\n- Central thesis: the financial crisis necessitates a \"triple comeback\" — renewal of global economic governance, the IMF’s return to the center of global governance, and a reassertion of the IMF’s original mission adapted to a changed global economy." }, { "heading": "Causes and diagnosis of the crisis", "content": "- Key systemic weaknesses identified:\n - An unbalanced, unsustainable global growth model relying on excess borrowing by some countries and excess saving by others.\n - Large increases in inequality; in the United States, inequality on the eve of the crisis \"was back where it was just prior to 1929.\"\n - Insufficient financial regulation and supervision.\n - Financial institutions took unprecedented risks, using \"complicated financial engineering that both magnified and disguised risk.\"\n - Regulators and supervisors often \"had bought into a culture of deregulation and a belief that financial markets could police themselves effectively.\"\n\n- Immediate macroeconomic outcome:\n - The Great Moderation \"turned into the Great Recession.\"" }, { "heading": "First comeback: renewal of global economic governance", "content": "- International cooperative responses during the crisis:\n - Coordinated monetary policy actions, including interest rate cuts, swap lines between the Fed and many other central banks, and unconventional monetary policy measures.\n - A \"2 percent of GDP global fiscal stimulus,\" implemented by countries with fiscal space, as advised by the IMF.\n - Collective action averted \"a second Great Depression.\"\n\n- Financial sector reform progress and gaps:\n - The FSB, together with the IMF and other institutions, is leading reform.\n - Basel III is described as \"a major step\" expected to improve bank capital qualitatively and quantitatively.\n - Identified next priorities: regulation of non-bank financial institutions; strengthening supervision; developing effective crisis resolution mechanisms.\n - Warning: \"Very little has been done\" on supervision and crisis resolution; delays here \"could well lead to the next crisis.\"\n - Emphasis on three pillars: regulation, supervision, and crisis resolution — with supervision possibly \"even more important than regulation.\"" }, { "heading": "Second comeback: the IMF returning to the center of global governance", "content": "- Timeline and IMF roles:\n - Davos (January 2008) to London (April 2009): from warning to response.\n - January 2008: IMF issued a warning and called for budgetary support (\"the famous stimulus\").\n - April 2008 Spring Meetings: IMF moved from warning to alarm, highlighting banking system losses and the need for coverage.\n - Early October 2008 (Fund’s Annual Meetings): first global response; broad recognition that government intervention and stimulus were necessary.\n - April 2009 (G20, London): second response; IMF resources were tripled and the Fund was authorized to issue \"$250 billion in SDRs\" to be distributed proportionately based on quota.\n - Decision to sell \"400 tons of the Fund’s gold\" to help the poorest countries; proceeds funded interest-free loans available beginning that summer.\n - Pittsburgh (September 2009): G20 decided to continue cooperation, creating the Mutual Assessment Process (MAP) and agreeing IMF governance reform work.\n - Seoul (November 2010): start of the \"Long March\" and entry to a second phase of G20 efforts.\n\n- New instruments and programmatic changes:\n - IMF resources increased substantially and used with lessons from past crises.\n - Fund-supported programs since 2008 have been streamlined to focus on urgent problems and to account for historical and political contexts and support for vulnerable populations.\n - Creation of the Flexible Credit Line and the Precautionary Credit Line to provide contingent support and allow countries to hold fewer reserves.\n - Financial safety nets and cooperation with regional organizations (e.g., the European Union, possibly the Chiang Mai Initiative) described as decisive steps.\n\n- G20 innovations and IMF support:\n - Mutual Assessment Process (MAP): holds members accountable to implement policies for better global outcomes.\n - \"Spillover reports\" to be produced by the IMF for five systemic economies: China, the Euro area, Japan, the UK, and the US.\n - Mandatory Financial Sector Assessment Programs for all systemic countries (previously voluntary; the United States and China had not participated)." }, { "heading": "The IMF's return to its original mission and governance reform", "content": "- Mandate and institutional role:\n - Rebalancing between regulation and markets; rejection of reliance solely on markets for sustainable growth.\n - Public sector role in repairing damage and potentially preventing crises if governments act with foresight.\n - Need for supervision willing \"to say no to powerful interests,\" a comprehensive macroprudential framework, and coherent domestic and cross-border resolution mechanisms.\n - Proposal (so far without success) for \"a tax on financial activities\" so the financial sector bears a substantial yet fair share of crisis costs.\n\n- Governance, legitimacy, and representation:\n - Concern about the G20's legitimacy: it accounts for \"more than 80 percent of the world’s output\" but excludes 167 countries of the IMF’s 187 members.\n - Recent IMF governance reforms approved a shift of \"over 6 percent in quota shares to dynamic emerging market countries.\"\n - Resulting changes: \"Brazil, China, India, and Russia will now be among our top ten shareholders.\"\n - Voting shares of the poorest countries protected; advanced European countries agreed to give up \"two seats on the Executive Board.\"\n - Movement toward an \"all-elected Board,\" described as making the IMF \"more democratic\" and \"a momentous change, unparalleled in the history of our institution.\"\n - Suggested alignment: closer alignment between an expanded G20 composition and the \"24 countries on the IMFC that represent the 24 constituencies\" of the Fund’s 187 members to enhance legitimacy." }, { "heading": "Policy recommendations and imperatives", "content": "- Strengthen three pillars of financial stability:\n - Regulation: continue implementing Basel III and extend attention to non-bank financial institutions.\n - Supervision: prioritize robust supervision and compliance enforcement.\n - Crisis resolution: establish effective domestic and cross-border resolution mechanisms to end too-big-or-too-important-to-fail and avoid socializing losses.\n\n- Institutional and governance actions:\n - Adapt mandates of international institutions such as the IMF and the WTO to the changing global economy.\n - Undertake the task of redefining the Fund’s mandate and amending its Articles of Agreement.\n - Ensure IMF legitimacy through representation and quota realignment to reflect the changing global balance.\n\n- Macro policy coordination:\n - Embrace the MAP and spillover analyses to manage \"economic butterfly effects\" and global imbalances.\n - Use the IMF’s contingent instruments (Flexible Credit Line, Precautionary Credit Line) and safety nets responsibly to support countries in difficulty." }, { "heading": "Closing scenario and call to action", "content": "- Two possible paths for the international community:\n - Choose a new growth model and a new governance model to secure higher and more sustainable growth, strengthen democracy, and contribute to peace.\n - Choose inertia and nationalism, risking years of instability and laying the groundwork for another crisis.\n\n- Final admonition: \"When the next financial crisis hits—and it is a matter of when, not if—we must be prepared.\" The imperative is to heed the crisis’s lesson and build a new, legitimate, and effective global economic governance.\n\nSpeech by Dominique Strauss-Kahn, Managing Director, International Monetary Fund, Geneva, December 8, 2010.\n\n---\n\n\n References\n\n- Republic of Korea and the IMF\n- United States and the IMF\n- People's Republic of China and the IMF\n- Brazil and the IMF\n- Speeches\n- Dominique Strauss-Kahn\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp120810" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/28/04/53/sp120810/index.md)", "[Structured JSON version](/en/news/articles/2015/09/28/04/53/sp120810/index.json)", "[Bundle manifest](/en/news/articles/2015/09/28/04/53/sp120810/bundle-manifest.json)", "Authors: Dominique Strauss-Kahn", "Published: December 8, 2010", "Speech by Dominique Strauss-Kahn, Managing Director, International Monetary Fund.", "Geneva, December 8, 2010. As prepared for delivery.", "Central thesis: the financial crisis necessitates a \"triple comeback\" — renewal of global economic governance, the IMF’s return to the center of global governance, and a reassertion of the IMF’s original mission adapted to a changed global economy.", "Key systemic weaknesses identified:", "Immediate macroeconomic outcome:", "International cooperative responses during the crisis:", "Financial sector reform progress and gaps:", "Timeline and IMF roles:", "New instruments and programmatic changes:", "G20 innovations and IMF support:", "Mandate and institutional role:", "Governance, legitimacy, and representation:", "Strengthen three pillars of financial stability:", "Institutional and governance actions:", "Macro policy coordination:", "Two possible paths for the international community:", "Final admonition: \"When the next financial crisis hits—and it is a matter of when, not if—we must be prepared.\" The imperative is to heed the crisis’s lesson and build a new, legitimate, and effective global economic governance.", "[Republic of Korea and the IMF](http://www.imf.org/external/country/KOR/index.htm)", "[United States and the IMF](http://www.imf.org/external/country/USA/index.htm)", "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)", "[Brazil and the IMF](http://www.imf.org/external/country/BRA/index.htm)", "[Speeches](https://www.imf.org/en/news/searchnews)", "[Dominique Strauss-Kahn](https://www.imf.org/external/np/omd/bios/dsk.htm)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2015/09/28/04/53/sp120810/index.md", "json": "/en/news/articles/2015/09/28/04/53/sp120810/index.json", "bundleManifest": "/en/news/articles/2015/09/28/04/53/sp120810/bundle-manifest.json" }, "generatedAtUtc": "2026-09-27T11:04:32.823Z" }