UNITED NATIONS - / MaximsNews Network / 08 June 2009 -  With the milestone arrival of the first hundred days of the Obama administration, there has been a plethora of conferences held in the US (and in select cities around the world) that have focused on assessing the young Obama presidency.  

While some of these programs have examined the administration’s early initiatives targeted at creating a green economy and improved energy self-sufficiency, other programs have reviewed the administration’s early efforts on a proposed national healthcare program. 

The dominant number of these symposium events (particularly the events hosted in New York City, the epicenter of the financial meltdown) have sought to address the administrations’ response to the state of the ongoing global financial crisis.  

Within a ten day period, New York City-based programs were presented to packed audiences at the Metropolitan Museum of Art (that included Paul Krugman, the 2008 recipient of the Nobel Prize for Economics and George Soros, the international financier), the Princeton Club of New York (with financial journalists from the Economist, Forbes, and Fortune), the Franklin and Eleanor Roosevelt Institute (whose speakers included two Nobel laureates, Robert Solow and Joseph Stiglitz), the New York Society of Security Analysts’ discussion on the global financial crisis and the recent G-20 meeting, the Americas Society’s panel discussion launching the new issue of the Americas Quarterly that is focused on the impact of the global economic crisis on the Americas, and the New York Times special panel programs profiling the international crisis with speakers like Paul Krugman, Richard Holbrooke (the US Dept of State special envoy to Afghanistran and Pakistan) and Adam Cohen (lawyer and member of the New York Times’ editorial board). 

An additional notable NYC-based program that was orchestrated around the 100 day milestone was the full day event hosted by the Foreign Policy Association, BritishAmerican Business, and Chatham House. 

Along with the corporate sponsorships of KPMG, Santander, and JP Morgan Chase, this global financial forum event specifically sought to take stock of the current financial crisis and assess what the potential future will look like. 

With over 400 persons in attendance, the FPA forum included presentations from Christine Lagarde (the French Minister of Economy, Finance and Employment), Lord Adair Turner (chairman of the UK Financial Services Authority), Jean-Claude Trichet (president of the European Central Bank), Duncan Niederauer (CEO of NYSE Euronext), and Stephen Cecchetti (Economic Advisor and head of the monetary and economic department of the Bank for International Settlements). 

Additional distinguished notable speakers were Andrew Crockett (president of JP Morgan Chase International), Deven Sharma (president of Standard & Poors), Gary Parr (deputy chairman of Lazard Freres & Co.), and  Sir Deryck Maughan (partner and chairman Japan of Kohlberg Kravis Roberts & Co.). 

While the panel discussions at the FPA forum sought to address various issues connected to the global financial crisis such as the effective role of monetary policy tools, the effectiveness of currency policy interventions, and the role of central banks as a market stability regulator and a lender of last resort, the overarching theme among all the presentations delivered was the future effective role of regulation. 

According to Lord Turner, the existing financial system has failed spectacularly.  It generating a severe recession that few experts foresaw.   He noted that it re-enforced two critical observations: 1.) the crumbling of confidence in the banking system; and 2.) the banking crisis-led recession is much deeper and longer. 

Core reasons for the collapse of the global financial system notes Lord Turner include the following:  the rapid growth of leveraging, the unchecked expansion of cross-border securitization, the over reliance on mathematical modeling, excessive risk taking, and the lack of appropriate regulatory frameworks and guidelines. 

Interesting enough, these same observations have been made about the global infrastructure finance arena during select time frames including the 1997 Asia currency crisis and the 2005 termination of the Aquas Argentina contract when excessive risk taking, mismatched currency transactions, and lack of sound regulatory frameworks jeopardized the ongoing functioning of power and/or water PPP concession contracts. 

Other notable speakers including Stephen Cecchetti and Duncan Niederauer also re-enforced the critical role of regulation and the importance of maintaining and/or re-establishing liquidity.  Banks need to start lending again. They need to start making new loans. 

Not only is this important for the global banking industry sector overall but it is particularly significant for the global infrastructure finance arena. Currently, it is extraordinarily challenging for water and wastewater infrastructure projects to put together adequate upfront financing.   

Because of the current shortage of liquidity (both in the US and around the world) as well as the higher cost of financing, much needed infrastructure projects are not getting funded.  

According to PPIAF (public private infrastructure advisory facility), a department housed within the World Bank Group, financial closure of public-private infrastructure projects have declined since the global financial crisis ignited in September 2008. Financial investment in water infrastructure projects declined by roughly 40% during the August – December 2008 period versus year ago. 

The power infrastructure sector, specifically, experienced a 10% decline while the transportation sector reflected a 26% drop.  Investment in World Bank Group-led PPP telecommunications projects remained flat during this period versus year ago. 

Observes Jean-Claude Trichet, the president of the European Central Bank, restoring confidence in the global economic system is of paramount importance in order to return to a level of sustainable prosperity.  

Policymakers around the world are currently facing formidable challenges. Central banks around the world are united in purpose and in recognition for a need to implement a tough correction across the global financial sector. 

It can be effectively argued that only when this correction takes place and more defined financial regulatory guidelines/standards are implemented along with greater transparent financial practices will we witness a re-booting of existing municipal bond markets in select regions around the world, a re-igniting of the credit markets, and a return of commercial bank lending at realistic terms that can collectively help re-energize the global economy and consequently global infrastructure finance and project development including water/wastewater infrastructure projects. 

The billion dollar question – how quickly can this correction to the global financial sector be made before we witness a further deterioration in the international economy and a continued shrinkage in the funding options for much needed infrastructure projects around the world.