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Question about U.S. current account deficit
Crockett:  What we have to reiterate is that the level of the US current account deficit cannot remain as high as it is forever.  That is not a controversial statement.  Because of that, the process of correcting the imbalance in global account positions is inevitably going to involve a change in exchange rates and the fact that that has begun to happen in the exchange markets is consistent with the necessary process of adjustment and in that sense is something that one would welcome.  As Bill pointed out and as the report said, there are various ways in which imbalances could be corrected and  the most desirable way would be an acceleration of productivity growth  and an acceleration of activity in Europe which would tend to support global activity and would probably induce capital toward Europe which would have an effect on the exchange rate and therefore  supporting the Euro relative to other exchange rates.  The most important thing is not what is happening in the exchange markets with regard to a currency but what are the forces that are driving that currency.

JV:  Enron – in light of the financial architecture, was it a surprise that you cannot legislate honesty and integrity?

Well, it does not surprise that you cannot legislate honesty and morality but I was surprised and I think I would challenge any body to say that they were not surprised by the level and intensity of the scandals, the accounting development that it revealed.  I think every body who has witnessed that and has spoken about it says that it is an unacceptable element of the infrastructure and an unacceptable aspect of how companies and markets work.  That does not get you to the solution.  It is a very complex method to know how far to change structure and culture within companies.  This is a very complex matter and I believe and have said on a number of occasions that it would be A big mistake to adopt knee jerk reactions to some things which have been revealed in the case of Enron/WorldCom and others corporate failures and down grades.  We need to sit down and take a careful look at what it is in the incentive structure that pushes in that direction, whether those aspects can be corrected by the internal processes of markets or whether they need to be supported by regulatory or legislative action and that is a debate which I think needs to take months longer and should not be dealt with on the basis of responding to scandal.  

I would  also like to say that these issues concern a wide range of participants.  It is not just the matter between a particular limited group of regulators.  I chair the Financial Stability Forum which I chair which brings together central banks, standard setters, finance ministries, national regulators—all of these from the different regions of the world.  These have all got interests and if each country or authority quickly rushes to judgment on its own regulatory structure, then we risk having an inconsistent set of responses and risk not using this opportunity to heighten consciousness of the problems in the corporate sector and risk not using the opportunity as we should to introduce something that improves the efficiency and robustness of the system and we risk having, I think not using the opportunity of the situation to improve it.

William White:

Let me add one thing.  The thing that struck me, it is not just Enron, it is how many different levels of governments failed.  When you think about it, it is systemic in the sense of something feeding back to human nature.  I think the fundamental  issue was that while the going is good, people don’t ask the right questions.  I think the policy conclusion—how one can do it—with respect to fiscal policy—you should be storing up, as it were “treasures in heaven” as it were during the good times to prepare for the bad times.  Capital for regulatory purposes –the same kind of thing.