Fix your banks first, says IMF
(27 March 2009 – Global) While stimulus packages and industry regulation are at the forefront of current political agendas in facing the global financial crisis, the IMF has said that the first step to economic turnaround is to fix the banks.
The head of the International Monetary Fund, Dominique Strauss-Kahn, said that cleaning up the banking sector must be the priority for governments in order to fight the global economic crisis.
You never get out of a crisis, however much money you put into stimulus measures, if you don't clean up the banking sector, Strauss-Kahn said in an interview on France 2 television.
The major problems with banks is that toxic assets continue to cause problems with banks balance sheets, and while this is still the case lending will not get the kick start it needs.
With an estimated US$2.3 trillion in toxic assets, it is vital that they be cleaned up so banks can resume lending to companies that create jobs.
While both America and Europe are giving their best efforts to fix their economies, Strauss-Kahn said neither side appeared to be doing enough to fix their banks.
He said that the Americans are putting a lot of emphasis on stimulus, while the Europeans are putting more emphasis on the need for regulation. Strauss-Kahn said that both of these strategies are fundamentally correct, however economic problems still remain.
He concluded that from the point of view of the IMF, neither of them, the Americans or Europeans are putting enough emphasis on a third factor, which is the most important and which is cleaning up the banks.
You never get out of a crisis, however much money you put into stimulus measures, if you don't clean up the banking sector, Strauss-Kahn said in an interview on France 2 television.
The major problems with banks is that toxic assets continue to cause problems with banks balance sheets, and while this is still the case lending will not get the kick start it needs.
With an estimated US$2.3 trillion in toxic assets, it is vital that they be cleaned up so banks can resume lending to companies that create jobs.
While both America and Europe are giving their best efforts to fix their economies, Strauss-Kahn said neither side appeared to be doing enough to fix their banks.
He said that the Americans are putting a lot of emphasis on stimulus, while the Europeans are putting more emphasis on the need for regulation. Strauss-Kahn said that both of these strategies are fundamentally correct, however economic problems still remain.
He concluded that from the point of view of the IMF, neither of them, the Americans or Europeans are putting enough emphasis on a third factor, which is the most important and which is cleaning up the banks.
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