Welcome
World leaders convened Saturday for a second straight day hoping to tackle a financial crisis that has ricocheted across the globe and left the United States and other countries on the brink of deep recessions.
Their goal: to prevent a similar calamity from happening again.
The historic two-day summit meeting, which brought together prime ministers and presidents from Group of 20 countries, got in full swing Saturday following an extravagant working dinner at the White House.
"We had a good frank discussion last night," President Bush said. "There's some progress being made, but there's still a lot more work to be done."
The conference participants were aiming to figure out what caused the global crisis and assess government responses to it, Bush said Friday. The summit would also identify regulatory reforms and launch a "specific action plan" to implement them, he said.
"Billions of hardworking people are counting on us to strengthen our financial systems for the long term," he added.
Bush is expected to make a statement at about 3 p.m. ET on the findings of the summit.
Still, the expectations for the talks remain low.
In the days leading up to the summit, speculation abounded that leaders would accomplish little else but narrowing the focus for future talks - likely to be held in the first few months of 2009 after U.S. President-elect Barack Obama is sworn into office.
Obama is not attending this weekend's summit. He sent as emissaries former U.S. Secretary of State Madeleine Albright and Jim Leach, a former Republican congressman from Iowa.
Bush, who offered to host the meeting nearly a month ago, echoed those exact sentiments in remarks made earlier this week. The imminent change in power at the White House has led many to believe that could also hamper any progress.
Attendees of the summit include leaders from such nations as China, Brazil, Saudi Arabia and Japan.
A world of trouble
The pace of the world's financial problems - rooted in large part in the collapse of housing prices and risky lending and borrowing - have accelerated in recent weeks.
The Organization for Economic Cooperation and Development, an international group based in Paris, said this week that the gross domestic product for its 30 members was likely to fall by 0.3% in 2009.
Major indexes around the globe have fallen off a cliff over the last two months. The Russian stock market has lost 65.5% of its value since the start of the year. Stocks in Japan and the United States have been equally hard hit, falling 42% and 33%, respectively.
Some countries have nearly collapsed under the weight the economic crisis.
In Europe, the pain spans countries of all sizes.
The 15 nations that share a common currency - the euro - said this week that their economies are in recession. Germany, Europe's largest economy, is suffering.
In Iceland, where the government intervened to save the banking system from total failure, inflation is running at a painful 12.1% while economic growth has nearly flatlined.
Central bankers and government officials, hoping to halt the contagion, have taken unprecedented steps in recent weeks.
Britain, France and the United States have bought ownership stakes in banks and pumped them full of capital in the hopes of unlocking frozen credit markets. Earlier this week, China unveiled a massive, $585 billion economic stimulus package to try to keep its once red-hot economy moving forward.
Remembering Bretton Woods
With the crisis showing no signs of abating, several leaders have been trying to advance an agenda for the talks, which some observers have referred to as "Bretton Woods II" - a nod to a similar global economic summit held in July 1944 to reverse some of the painful trade and foreign exchange policies enacted in the wake of the Great Depression.
There have been calls, for example, to create a global accounting standard to replace the current mark-to-market standard, which some have blamed for the billions of dollars of losses suffered by banks.
Credit rating agencies and hedge funds have also become a target. French President Nicholas Sarkozy, who has embraced a hard-line approach toward regulation, has publicly said he is in favor of greater oversight of both industries.
And there has also been speculation that additional countries could enact economic stimulus packages of their own in the wake of the talks.
But what is expected to remain front and center is the subject of regulation and how to best modernize the global financial system for the 21st century.
One approach could involve granting greater powers to the Financial Stability Forum, which represents central bankers and regulators, or the International Monetary Fund, which has played a large role in recent weeks helping to bail out struggling countries.
Another possibility could involve the creation of a college of regulatory supervisors that would exchange notes about some of the trends and risks they are seeing within their own borders.
In a surprise move, FDIC Chairwoman Sheila Bair Friday unveiled details of her plan to have the government help delinquent homeowners.
The proposal would have the government share up to 50% of the losses if the homeowner re-defaulted on the modified loan.
The plan is expected to initially help 2.2 million borrowers get new loans; after some borrowers re-default, 1.5 million would ultimately keep their homes, the FDIC estimated.
It would also pay servicers $1,000 to adjust the loan so that monthly payments were as low as 31% of a borrower's income.
The plan would cost an estimated $24.4 billion, which Bair has said could come from the $700 billion bailout Congress approved last month.
"It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures," the Federal Deposit Insurance Corp. said in a statement Friday. "A loss share guarantee on re-defaults of modified mortgages can provide the necessary incentive to modify mortgages on a sufficient scale."
Bair's move Friday sets up a public power struggle not often seen within an administration.
The FDIC chairman has long pushed for the government to take a more active role in helping troubled homeowners. She initiated a similar plan at IndyMac, one of the largest mortgage lenders, after the agency took it over in mid-July.
Bush administration officials, however, have resisted her efforts, instead unveiling a plan Tuesday to streamline modifications of loans held or guaranteed by Fannie Mae and Freddie Mac.
Though he praised Bair's proposal, Treasury Secretary Henry Paulson Wednesday said it was one of several under discussion. Bair supporters took that to mean the plan was essentially dead.
Congressional Democrats, however, have continued to press for increased assistance to homeowners. They have publicly backed Bair, which could give her proposal the support needed for adoption.
"[The Fannie/Freddie plan] should not be considered a replacement for the guarantee program authorized by the recently-enacted financial rescue law which the FDIC has agreed to operate," Sen. Christopher Dodd, D-Conn. said Tuesday, after the mortgage finance plan was announced.
"We are still awaiting agreement from the Treasury Department to move this program forward, despite indications given to me weeks ago that an agreement was imminent. I have been in contact with both Secretary Paulson and Chairman Bair on this issue, and I intend to keep pushing for more aggressive and effective action."
Backstopping loan modifications
Borrowers who are at least 60 days late on payments would qualify for this program.
Servicers would have to systematically review all the loans in their portfolios to determine whether they would recover more value by modifying the mortgage rather than foreclosing on the home.
Loans would be adjusted by reducing the interest rate, extending the term or deferring part of the principal to the end of the mortgage.
But unlike some other government programs, the FDIC proposal would not reduce the principal to bring it in line with the home's current value. Some consumer advocates consider principal reduction key to assisting borrowers in areas where property values have plummeted, leaving many with mortgages greater than their home's worth.
Under the Hope for Homeowner program implemented last month, mortgages would be written down to 90% of the home's current market value and borrowers would be refinanced into 30-year fixed-rate mortgages insured by the Federal Housing Administration.
The FDIC's program, on the other hand, would not be as beneficial for so-called underwater homeowners. For situations where the mortgage is worth more than the home, the government's loss-sharing arrangement would gradually decline to 20% before ending for homes where the loan-to-value exceeds 150%. The loss-sharing arrangement would last for eight years.
Gasoline prices fell for the 53rd straight day, according a survey released Sunday by the motorist group AAA.
The average price of regular unleaded decreased to $2.259, a 2.3 cent drop from Saturday, according to the national survey, which is based on credit card swipes at gas stations. Before this week, the last time prices were this low was on February 24, 2007, according to AAA.
Over the last 53 days, prices have sunk $1.59, a 41.4% decrease, according to AAA.
A separate national survey found that gas prices dropped a little more than 48 cents in the last two weeks, continuing a dramatic fall.
It was the second largest drop in the six-decade history of the Lundberg Survey. The previous largest drop was just a few weeks ago, the last time the survey was conducted.
The average price of self-serve, unleaded gasoline in the United States on Friday was about $2.30 a gallon, said publisher Trilby Lundberg.
Demand for gasoline has continued to slip, despite the fall in gas prices. MasterCard's weekly survey of gas station credit card swipes showed demand down 3.9% last week, compared to the same period last year.
Prices have dropped 45%, or almost $1.86, from their record high of $4.114 a gallon set July 17, by AAA's count. The average price per gallon dropped below $3 on Oct. 18, the first time in nearly nine months.
The all-time high average was $4.11, set on July 11, according to Lundberg, and prices have been dropping ever since.
She attributed the price reductions to a drop in crude prices and demand.
By state, Alaska reported the highest average gas prices, $3.298 per gallon, while Missouri boasted the cheapest, at $1.949 a gallon, according to AAA.
Gasoline prices have fallen while average crude prices have done the same in the past four months. U.S. crude for December delivery settled at $61.04 a barrel in New York trading on Friday, down from its high of $147.27 a barrel on July 11.
Only two states, Alaska and Hawaii, have average gas prices above $3 per gallon, while 22 states now report prices below $2.25 per gallon, AAA found.
By city, Lundberg found that Tulsa, Oklahoma, posted the lowest average gas price of $1.89 Friday. The highest averages were $3.14 in Anchorage, Alaska, and $3.09 in Honolulu, Hawaii.
Average prices in some other cities, according to Lundberg:
Detroit, Michigan $2.02
Denver, Colorado $2.15
Atlanta, Georgia $2.16
Boston Massachusetts $2.38
Philadelphia, Pennsylvania $2.41
Los Angeles, California $2.61
The AAA figures are state-wide averages based on credit card swipes at up to 100,000 service stations across the nation. Many drivers have reported even lower prices across the country.
The Lundberg Survey is based on responses from more than 5,000 service stations nationwide.
