WASHINGTON – World leaders moved toward agreement Friday on an early warning system for financial calamities, a commitment to tougher accounting rules and other modest steps to begin restoring stability in a crisis threatening the livelihoods of billions of people around the globe.
Nearly two dozen leaders met in Washington on in the largest gathering of its kind here in nearly a decade. They dined in extravagance at the White House in a prelude to a day of negotiations Saturday over how best to wrestle both large and developing economies back from the brink of chaos.
The leaders were on track to approve measures to make the world financial system more accountable to investors and more transparent to regulators, diplomatic sources said.
Those sources, speaking on condition of anonymity because leaders had yet to agree on their final communique, said the emerging agreement calls for an action plan to improve international monitoring of markets. The leaders also were expected to endorse more effective rules governing how companies value their assets, a weakness seen as partly responsible for the current financial crisis.
A second summit is envisioned in early spring, after Barack Obama becomes president. The first meeting, called by President George W. Bush, falls in a period of transition that inevitably leaves unclear what actions the U.S. is ready to take in the months ahead.
"Billions of hardworking people are counting on us," Bush said on a night when urgent motorcades swept presidents and prime ministers through a dark Washington mist to the White House.
Altogether, the U.S. approach of boosting oversight of shaky financial markets seemed to be holding sway over Europe's desire for tougher internationally enforced regulation.
Mexican President Felipe Calderon met former Secretary of State Madeleine Albright and former Rep. Jim Leach, and stressed that a return to protectionism would only complicate economic recovery efforts, according to the Mexican leader's office. Albright and Leach are representing Obama at the summit.
The president-elect stayed away from the meeting so as not to complicate matters for Bush.
Leaders from Britain, France, Germany, Russia, China and India were among those in Washington.
A new "college of supervisors," made up of financial regulators from many nations, and an early warning system to detect weaknesses in the financial system — both aimed at raising the oversight and openness of international markets — were among the ideas likely to be included in a joint communique.
Bush has supported those types of ideas in the past, said White House press secretary Dana Perino, hinting that the leaders, whose delegates have been negotiating for weeks, were poised to agree.
The summit, meant to be the first in a series, has a two-pronged agenda: Discuss what might still need to be done to turn the world's economies back from the edge of disaster and explore ways to revamp the global financial system's architecture to prevent similar meltdowns in the future.
Fearing a Wall Street plunge if the summit produces little, the White House has been lowering expectations as fast as other nations have been raising them.
"This problem did not develop overnight and it will not be solved overnight," Bush said in a dinner toast to his fellow leaders and their discussions. "But with continued cooperation and determination, it will be solved."
Separately, the government reported that sales by U.S. retailers fell by a record amount last month, and Federal Reserve Chairman Ben Bernanke hinted at another interest rate cut to encourage consumers. The Dow Jones industrials dropped 338 points.
As leaders poured into the U.S. capital Friday, Bush warned for the second day in a row of the dangers — in his view — of overeager government intervention. He said "reforms in the financial sector are essential" but strict new regulation of financial firms or products, such as some European leaders have advocated, would crush the global economy instead of protect it.
"The stakes are indeed high," he said. "Billions of hardworking people are counting on us to strengthen the financial system for the long term."
He got a boost from British Prime Minister Gordon Brown, who used rhetoric similar to Bush's in talking about a need to keep trade flowing and markets free. "Protectionism is the road to ruin," Brown told the Council on Foreign Relations in New York.
Brown has been among the leaders pushing for nations at the summit to pledge coordinated stimulus spending worldwide to combat the downturn that is squeezing millions of families and businesses.
Bush, however, cautioned that the billions of dollars being spent already by the U.S. and other countries should be given a chance to work.
"Our actions are having an impact," Bush said in his Saturday radio address, taped Friday and released early by the White House. "The United States and our partners are taking the right steps to get through the crisis."
Deeply skeptical, protesters staged demonstrations and their chants could be faintly heard as leaders arrived at the White House for the working dinner.
At the meetings, leaders were expected to set up working groups to devise the details of their proposals.
Europeans want to close loopholes that allow some financial institutions to evade regulation. They also want to ensure supervision for all major financial players, including credit ratings agencies or funds carrying high amounts of debt. They want a pledge for concrete changes in just 100 days.
But Bush is hoping that including developing nations such as China, India and Brazil in the talks will act as a brake on any push for intrusive regulation. Red-hot emerging economies bristle at being restricted just as they are trying to catch up to the developed world.
Bush's argument against government overreach rings hollow to many around the world who see the crisis as a problem made of a freewheeling U.S. system where easy credit, risky investing and lax oversight have become the norm. He also is seen by some as lacking credibility on the issue because he has overseen an unprecedented intervention by Washington in the private sector over the past few weeks in an effort to unclog credit markets.
An early warning system appears one area of compromise.
Advocated by the Europeans, it would watch for signs of problems like the bubble in the U.S. housing market that eventually burst, souring mortgage-related investments, leading to huge losses at financial companies and locking lending in a freeze that spread around the globe. The heads of the International Monetary Fund, the world's financial firefighter, and the Financial Stability Forum, a group that includes central banks and major financial regulators, said Friday they would cooperate on detecting vulnerabilities.
In addition, the "college of supervisors" would be a new body in which global regulators tasked with scrutinizing the world's largest financial institutions would compare notes, in hopes of spotting excessive risk-taking.
In a sign of the complicated arrangements necessary to house and host the largest gathering of government heads in Washington since NATO's 50th anniversary in 1999, Perino noted it would take 300 or 400 cars to accomplish the highly choreographed feat of bringing the leaders to dinner.
Bush, alone without his wife, greeted each of his guests individually as they pulled to the North Portico, with smiles and back pats for most, a protocol-laden process that took over 75 minutes. The leaders then ate with him in the State Dining Room, working for about two hours over a gourmet meal of quail, lamb and fondue accompanied by fancy wines.