Architects of stability? International cooperation among financial supervisors

Speaking in May 1998, in the shadow of an Asian financial crisis that was spreading globally, International Monetary Fund Managing Director Michel Camdessus announced that “the leaders of the world want to embark on the design of a new (financial) architecture.” Reflecting the position that industrial world governments would formally adopt at their forthcoming G8 summit in England, he asserted that the new architecture must be built atop several cornerstones, including a commitment to financial sector openness, good governance, and greater economic transparency. In addition, he suggested that international financial markets required the continuing elaboration of multilateral standards, codes, and best practices if future crises were to be avoided (Camdessus 1998). It did not take long for skeptics of this G8 proposal to rear their heads; after all, grandiose phrases like “new financial architecture” naturally provoked them. In a speech before the World Affairs Council, for example, Berkeley professor and former US Treasury official J. Bradford DeLong stated that “there is no world-wide political consensus” with respect to the systemic risks facing the global economy and that, as a consequence, “dreams of a rebuilt, reformed, and renewed international financial architecture will remain nothing but dreams” (DeLong 1999). Beyond these skeptics lurked the critics who – whether coming from the left or the right of the political spectrum – curiously shared the conspiratorial view that the new international financial architecture represented nothing more than another underhanded attempt by governments and international organizations to bail out reckless banks at taxpayer expense.