April 12, 2007
HP-348

Prepared Statement by Treasury Under
Secretary Timothy D. Adams
in Advance of the Spring Meetings of G-7
Finance Ministers and Central Bank
Governors, the International Monetary
Fund, and the World Bank

Washington, DC – Welcome. We have a very busy set of meetings over the next several days, and I would like to lay out some of the key items on the agenda.

As you know, Secretary Paulson will host the G-7 Finance Ministers and Central Bank Governors here at the Treasury on Friday. They will discuss the global economy, capital markets issues, trade, and IMF reform, among other things. This G-7 meeting will include an outreach dinner with China and counterparts from Russia, Saudi Arabia, and the United Arab Emirates to discuss investment flows from oil exporters.

The IMF's International Monetary and Financial Committee (IMFC) will meet Saturday, and the World Bank's Development Committee will meet Sunday. Also on Sunday, G-7 Finance Ministry Deputies will have an educational outreach meeting on hedge fund industry practices and developments with representatives from the hedge fund industry.

At the G-7 and IMFC meetings we will be able to share views with our colleagues from around the world on a wide range of issues – global imbalances, IMF reform, capital market developments, debt sustainability in low-income countries, combating terrorism financing, and the Doha round. Additionally, the Development Committee will discuss countries' progress towards meeting development goals and assess the Bank's work in Africa. Let me just make a few comments on some of these issues.

The global economic environment continues to be very favorable, but our colleagues will be interested in the health of the United States economy, especially against the background of developments in the sub-prime mortgage sector. We will emphasize that the United States economy continues to perform well, with solid growth of 3.1% over the past 4 quarters and a healthy labor market. Unemployment has declined to 4.4% while real wage growth is strong. Inflation appears contained. The deficit has shrunk by half in two years. That is three years ahead of schedule.

We are reaching a critical time on reform of the IMF. The IMF needs a package of meaningful reforms to safeguard its relevance and legitimacy. The IMF has a unique and serious responsibility for exchange rate surveillance, and the Managing Director's proposals to revise the IMF's 30-year old principles make great sense. The rise of dynamic emerging markets along with a static governance structure means the IMF no longer reflects the global economy. We will urge the major shareholders to be bold and follow through with fundamental reform of IMF quotas. In this regard, the United States will reiterate our offer to forgo any increase in our pre-Singapore voting share that might result from a new formula; we continue to call upon all similarly-situated industrial countries to join us.
And there is clear interest among major emerging markets for a new reserve augmentation facility. I want to welcome the Malan Report on IMF-World Bank Collaboration for its recommendations on sharpening the IMF's short-term financial role in low-income countries. Lastly, we will discuss the IMF's longer-term finances and the Crockett Report, though with ample reserves to cover shortfalls in the medium-term the Fund need not rush to action. If revenues do not rebound, expenditure measures – and difficult choices on priorities – will require serious consideration.
We will be discussing hedge funds and highlighting the approach of the U.S. President's Working Group on Financial Markets (PWG) to private pools of capital. The PWG guidelines are intended to guide all market participants – counterparties and creditors, private pool managers, investors, fiduciaries, and financial regulators – in addressing issues associated with the growth and dynamism of these investment vehicles. They do so through a flexible, principles-based treatment of systemic risk and investor protection issues. We will discuss how robust domestic bond markets are necessary for the growth and stability of all economies, including the emerging markets. The weekend's agenda also addresses the interesting idea of mutual recognition of comparable regulatory regimes, which we continue to discuss with our securities regulators.
We will be urging our colleagues to reinvigorate the Doha Round of trade negotiation, especially in the area of financial services, which play a critical role in facilitating economic development. We will also be promoting responsible lending practices, such as the IMF/World Bank Joint Debt Sustainability Framework, to enhance debt sustainability among developing countries.
Finally, we will of course be eager to collaborate with our colleagues on ways to more vigorously counter money laundering, terrorist financing, and other illicit finance to promote the stability and integrity of the international financial system.

Also, on Monday, Treasury will host a meeting of the U.S.-China Joint Economic Committee (JEC), an important forum for discussing macroeconomic and financial issues in our two countries. These issues will play a central role in the upcoming Strategic Economic Dialogue meeting in May. To achieve sustained growth, China needs to rebalance its economy. Creating an efficient and competitive financial sector is a key component of this rebalancing and is critical to ensuring future growth in China, as well as the global economy.

I am happy to take your questions on any of these points or anything else that will arise this weekend. Thank you.



	April 12, 2007 HP-348 Prepared Statement by Treasury Under Secretary Timothy D. Adams in Advance of the Spring Meetings of G-7 Finance Ministers and Central Bank Governors, the International Monetary Fund, and the World Bank Washington, DC – Welcome. We have a very busy set of meetings over the next several days, and I would like to lay out some of the key items on the agenda. As you know, Secretary Paulson will host the G-7 Finance Ministers and Central Bank Governors here at the Treasury on Friday. They will discuss the global economy, capital markets issues, trade, and IMF reform, among other things. This G-7 meeting will include an outreach dinner with China and counterparts from Russia, Saudi Arabia, and the United Arab Emirates to discuss investment flows from oil exporters. The IMF's International Monetary and Financial Committee (IMFC) will meet Saturday, and the World Bank's Development Committee will meet Sunday. Also on Sunday, G-7 Finance Ministry Deputies will have an educational outreach meeting on hedge fund industry practices and developments with representatives from the hedge fund industry. At the G-7 and IMFC meetings we will be able to share views with our colleagues from around the world on a wide range of issues – global imbalances, IMF reform, capital market developments, debt sustainability in low-income countries, combating terrorism financing, and the Doha round. Additionally, the Development Committee will discuss countries' progress towards meeting development goals and assess the Bank's work in Africa. Let me just make a few comments on some of these issues. The global economic environment continues to be very favorable, but our colleagues will be interested in the health of the United States economy, especially against the background of developments in the sub-prime mortgage sector. We will emphasize that the United States economy continues to perform well, with solid growth of 3.1% over the past 4 quarters and a healthy labor market. Unemployment has declined to 4.4% while real wage growth is strong. Inflation appears contained. The deficit has shrunk by half in two years. That is three years ahead of schedule. We are reaching a critical time on reform of the IMF. The IMF needs a package of meaningful reforms to safeguard its relevance and legitimacy. The IMF has a unique and serious responsibility for exchange rate surveillance, and the Managing Director's proposals to revise the IMF's 30-year old principles make great sense. The rise of dynamic emerging markets along with a static governance structure means the IMF no longer reflects the global economy. We will urge the major shareholders to be bold and follow through with fundamental reform of IMF quotas. In this regard, the United States will reiterate our offer to forgo any increase in our pre-Singapore voting share that might result from a new formula; we continue to call upon all similarly-situated industrial countries to join us. And there is clear interest among major emerging markets for a new reserve augmentation facility. I want to welcome the Malan Report on IMF-World Bank Collaboration for its recommendations on sharpening the IMF's short-term financial role in low-income countries. Lastly, we will discuss the IMF's longer-term finances and the Crockett Report, though with ample reserves to cover shortfalls in the medium-term the Fund need not rush to action. If revenues do not rebound, expenditure measures – and difficult choices on priorities – will require serious consideration. We will be discussing hedge funds and highlighting the approach of the U.S. President's Working Group on Financial Markets (PWG) to private pools of capital. The PWG guidelines are intended to guide all market participants – counterparties and creditors, private pool managers, investors, fiduciaries, and financial regulators – in addressing issues associated with the growth and dynamism of these investment vehicles. They do so through a flexible, principles-based treatment of systemic risk and investor protection issues. We will discuss how robust domestic bond markets are necessary for the growth and stability of all economies, including the emerging markets. The weekend's agenda also addresses the interesting idea of mutual recognition of comparable regulatory regimes, which we continue to discuss with our securities regulators. We will be urging our colleagues to reinvigorate the Doha Round of trade negotiation, especially in the area of financial services, which play a critical role in facilitating economic development. We will also be promoting responsible lending practices, such as the IMF/World Bank Joint Debt Sustainability Framework, to enhance debt sustainability among developing countries. Finally, we will of course be eager to collaborate with our colleagues on ways to more vigorously counter money laundering, terrorist financing, and other illicit finance to promote the stability and integrity of the international financial system. Also, on Monday, Treasury will host a meeting of the U.S.-China Joint Economic Committee (JEC), an important forum for discussing macroeconomic and financial issues in our two countries. These issues will play a central role in the upcoming Strategic Economic Dialogue meeting in May. To achieve sustained growth, China needs to rebalance its economy. Creating an efficient and competitive financial sector is a key component of this rebalancing and is critical to ensuring future growth in China, as well as the global economy. I am happy to take your questions on any of these points or anything else that will arise this weekend. Thank you.