For three days in September, Charlottesville will become ground zero for finance leaders from around the world. This fall, The Miller Center of Public Affairs will host “The New Financial Architecture: A Global Summit” on September 7 to 9.
Miller Center Director and former governor Gerald Baliles announced the summit May 29 as part of an event during which he interviewed John Snow, former treasury secretary under the George W. Bush administration.
Snow, who holds a Ph.D. in economics from UVA, is now the chairman of Cerberus Capital, a private-equity firm that made headlines last year when it bought a controlling stake in Chrysler for $7.4 billion. He will host more than 12 former financial ministers from Europe, Asia, Africa, South America and the Middle East.
The summit, which will be covered by CNBC, is scheduled a month prior to the fall meetings of the World Bank and International Monetary Fund. At its conclusion, the summit participants will issue a joint statement that assesses global economic challenges, as well as offer ways to address them.
The group, which Baliles said represents three quarters of worldwide economic activity, will focus on the issues involved with Sovereign Wealth Funds, changes in the world economic power and influence, the subprime crisis, the credit crunch and the future of the new financial architecture. Both Baliles and Snow said that financial leaders will come unfettered by their former official government positions, and therefore will be able to address these issues in a more open and honest way.
After the announcement, Baliles tossed Snow a number of questions that more or less served as a promo for the coming summit. And one of the issues that Snow tackled first was the subprime crisis and credit crunch, briefly describing how risk for loans was chopped up and distributed widely, to the point where people aren’t even sure who services their loans.
“Low and behold,” said Snow, “somebody woke up and said, ‘I’d like to get paid.’ Now we’re going through a huge correction that won’t end soon.”
Snow placed the majority of blame on the banks for not having the risky loans on their books, and therefore having little incentive to make sure the loans could be repaid. “My suggestion,” he said, “is to require the banks to keep some skin in the game.” Snow advocated banks keeping roughly 10 to 20 percent of risk from loans on their books.
Snow pointed to one common factor in the bundle of economic problems that the global economy is facing: the growth of China and other developing economies. He called China’s economic transformation, which in the last decade has created a giant middle class of more savvy and rabid consumers, the largest in the history of the world. And one of the commodities that the U.S. finds itself competing against China for is oil.
When Baliles asked Snow if he saw a bubble in energy prices (one that might burst soon and send gas prices down), Snow said that we’re stuck with the ever-rising price of energy commodities for the foreseeable future. Instead, he said, high prices will invite changes in behavior and new technologies.
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