Finanzkrise "Yes, mistakes have been made"

The global financial crisis started in the United States. In an interview with stern-magazine Robert Kimmitt, Deputy Secretary of the Treasury, admits mistakes and responds to criticism voiced by a member of the German government.

Mr. Kimmitt, what comes to your mind, when you think about the word Wall Street today?

We are in the middle of a very difficult situation in the world economy. Wall Street is an important address in the global financial system. But it is not the only address. So one of the things we've been trying to do is approach this issue directly and honestly - and also very collaboratively - with our friends abroad, particularly those like Germany who plays a key role in the international financial system.

But most people would think about arrogance, greed and ruthlessness in regards to Wall Street. Don't you?

I think this is in the mind of many in the public at the moment. We in government, around the world, have taken a very honest look at what has brought us to this point. We looked at all the global market participants, at investors, banks, mortgage originators, credit rating agencies, and regulators. No one performed as well as they should have.

At what kind of results did you arrive at the Treasury, one of the key government regulatory bodies?

Excesses on the market happened. Each participant needs to improve. We laid out an action plan that addresses these issues and corrects the abuses of the past.

And why do you come to these conclusions only now, as the world economy stands at the abyss? Now it seems that the U.S. is to blame for the worst global financial and economical crisis since decades.

It is not a question of blame. Yes, mistakes have been made. There is no doubt about that. But we will learn from those mistakes. And the world financial system will come through this stronger.

Where do you take this optimism from? The world is sliding into a recession.

We face difficult times. And it will take a long time to restore trust into the markets. We know a series of steps are needed. This is why we developed the action plan, including a financial rescue package adopted last week...

...Congress adopted a 700 billion Dollar package only in the second attempt, and even this reluctantly. Why should taxpayers pay the bill for reckless multi-billion speculations of a very few?

It is our priority to reduce the burden for the taxpayer to an absolute minimum. But the government needs to help to unclog the credit market. The lack of confidence is so big at the moment, that banks barely give loans. This package is not a bailout. It is an opportunity to stabilize our financial system.

You faced especially harsh criticism of your German friends. Germany's Finance Minister Peer Steinbrück is convinced, that the U.S. is clearly responsible for this crisis.

In this area, as with most transatlantic economic issues, there's much more that unites us than divides us. Already more than a year ago we had quite a discussion with our European colleagues about possible risks in the financial system. Yes, we had some differences in the beginning. But they were largely about better oversight in regard to hedge funds. We know, mistakes have been made in the United States. But each side has been listening to each other. We achieved quite a lot - and we achieved it together.

Your colleague Mr. Steinbrück remembers, though, that his warnings already two years ago were met with mockery, at best, from your side.

I participated in many of those international discussions, for example the May 2007 G-7 Finance Ministers meeting in Potsdam. We had an exceptional dialogue among all countries. And in regards to the problem with hedge funds we agreed on a voluntary initiative of the industry about best practices. We pursued a common goal, and we worked out joint communiqués. They are public, everybody can read them.

Do you feel that Germany makes the U.S. a scapegoat, now?

This crisis didn't start with hedge funds. It started right in the heart of the banking system - which is regulated by state authorities everywhere. Since the first day of the crisis we have been in close contact with our partners in the G-7, but also with countries like China, India, Brazil, Russia. The cooperation with each country and region is unprecedented. We learned our lesson.

Which is?

We need more transparency, especially in regard to certain highly complex financial instruments, that have reached a degree of opaqueness, that became difficult even for the regulators to regulate and for the rating agencies to rate. Changes in regard to those global instruments are a task of the international financial community, not only of the U.S - as banks operate internationally.

Interview: Katja Gloger

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