serve to lead

G7 Communique: The G-7 agrees today that the current situation calls for
urgent and exceptional action. We commit to continue working
together to stabilize financial markets and restore the flow of
credit, to support global economic growth. We agree to:

1. Take decisive action and use all available tools to support systemically
important financial institutions and prevent their failure.

2. Take all necessary steps to unfreeze credit and money markets and ensure that
banks and other financial institutions have broad access to liquidity and
funding.

3. Ensure that our banks and other major financial intermediaries, as needed,
can raise capital from public as well as private sources, in sufficient amounts
to re-establish confidence and permit them to continue lending to households
and businesses.

4. Ensure that our respective national deposit insurance and guarantee programs
are robust and consistent so that our retail depositors will continue to have
confidence in the safety of their deposits.

5. Take action, where appropriate, to restart the secondary markets for
mortgages and other securitized assets. Accurate valuation and transparent
disclosure of assets and consistent implementation of high quality accounting
standards are necessary.

The actions should be taken in ways that protect taxpayers and avoid potentially
damaging effects on other countries. We will use macroeconomic policy tools as
necessary and appropriate. We strongly support the IMF's critical role in
assisting countries affected by this turmoil. We will accelerate full
implementation of the Financial Stability Forum recommendations and we are
committed to the pressing need for reform of the financial system. We will
strengthen further our cooperation and work with others to accomplish this plan.



Review and reactions to G7 meeting on global financial crisis

* The G7 Meeting in Washington resulted in a pledge to prevent vitally important
banks failing and to end the credit crisis that has frozen credit markets.

* The G7 communique lacked details and French economics minister Christine
Lagarde commenting on the G7 statement said: "Some of us wished it had more
teeth and more muscle to it."

* The surprisingly short G7 statement stopped short of backing the UK plan to
guarantee lending between banks. According to a Reuters report, Wall Street felt
that the UK plan was a vital step that the G7 must take to end the growing panic
on financial markets.

* Analysts contacted by Reuters after the G7 meeting said that the G7 statement
was unlikely to end the sense of panic that has swept through global markets.

* Kim Rupert MD of global fixed interest analysis at Action economics told
Reuters that the markets wanted more assurance that there would be a "unified
global backstopping of the banks and it doesn"t sound like it is there."

* After the meeting US Treasury Secretary Paulson said the US was developing
plans to buy equity stakes in financial institutions. Paulson declined to give a
timetable or details about implementation of the 700 BLN plan to buy mortgage
securities, other troubled assets and equities in banks saying instead: "We're
going to do it as soon as we can do it and do it properly and do it effectively
and right. Trust me, we are not wasting time; people are working around the
clock to deal with this."


* As a follow-up to the G7 meeting, EU Leaders will meet on Sunday in Paris to
discuss the financial crisis. French Economy Minister Lagarde said that the
meeting would serve "not to talk about it, but to put meat, muscles on the bones
of that skeleton and to develop, follow up and execute upon it. Lagarde followed
by saying: I can assure you that you won't be disappointed and that it will be
quite specific."


Comment From reading all of the various reports on the G7 meeting, it strikes
me as very likely the markets will be disappointed by the lack of details from
the G7 meeting. Perhaps the markets were expecting too much, but it is also
clear that getting the various governments of the leading economies to agree to
a united fix for the problem is extremely difficult. French Economics Minister
Lagarde promises that the EU meeting in Paris on Sunday (I am writing this
before the meeting begins) will be different and there will be a plan with "meat
and muscle on the bones". I think I speak for everyone when I say let"s hope so.
If the EU doesn"t produce some bold, unified measures it could be another
ugly start to the week. If disappointment is the mood on Monday, the JPY and USD
will continue to move higher while the EUR and AUD will stay under pressure. The
market is impatient and wants to see the global authorities produce the goods
immediately if not sooner. It is likely that the urgency of the situation will
eventually result in drastic measures to calm the credit markets, but it might
take time and in the meantime a lot more damage can be done given the panic out
there. If and when the markets calm, the AUD will rise like the phoenix, as it
is way oversold and way too low given the fundamentals. These are extraordinary
times. --John.Noonan@thomsonreuters.com