PITTSBURGH — The Obama administration on Wednesday cautioned against complacency on the eve of a global economic summit, arguing that signs of an economic revival are not grounds for abandoning a significant overhaul of the world's financial system.
"We simply cannot walk away from the worst financial crisis since the Great Depression and not do everything in our power to reform the system that contributed to this breakdown," Treasury Secretary Timothy Geithner said.
Geithner delivered that message in Washington to the House Financial Services Committee, which was opening hearings on the administration's sweeping overhaul of the financial system. But it was also a plea the administration was making to other members of the Group of 20 leading economies, who were gathering in Pittsburgh for two daysof talks today and Friday.
Those talks were being held under heavy security. Protesters have vowed to use the sessions as a stage to highlight their grievances against global capitalism.
Activists from the environmental group Greenpeacehung a large banner from a downtown Pittsburgh bridge warning of climate disaster and urging the world leaders to reduce carbon dioxide emissions. Four protesters dangled from lines over the Ohio River.
At the G-20, the administration will call on the world to end government subsidies that encourage the use of fossil fuels some blame for global warming.
President Barack Obama said he would seek a gradual elimination of fossil fuel subsidies. White House officials said the time frame for this phase-out had not yet been determined. However, this proposal was likely to spark opposition from China, which along with the United States is the largest emitter of greenhouse gases.
In the financial area, the United States is pushing for the other G-20 countries to adopt tougher rules on bank capital reserves, the cushion that banks hold against loan losses - which proved to be badly inadequate when the financial crisis struck a year ago.
But European countries are balking at the U.S. capital push, arguing that the way it is currently structured itwould benefit U.S. banks at the expense of their European competitors.
In his congressional testimony, Geithner said it was important for all nations to work for rules that would not put any country's system at a disadvantage.
The administration unveiled a 95-page blueprint for regulatory changes in June, but it has been bottled up in Congress. Geithner told lawmakers that it was critical that they move ahead with the effort.
"Time is the enemy of reform. As some normalcy returns to our financial system and our economy, we cannot let it be cause for complacency," Geithner said.
Thousands of law enforcement authorities have started to erect a security perimeter around the David L. Lawrence Convention Center in downtown Pittsburgh, where the talks will be held, an effort put on an even higher alert after the discovery of an alleged bomb plot in Denver and New York set off a series of counterterrorism bulletins.
The Coast Guard was closing access to the city's three rivers from 6 a.m. today to 10 p.m. Friday and patrolling with 11 boats. State police will have 1,200 troopers in the area, including some in helicopters and airplanes. The Pennsylvania National Guard is heading a task force of 2,500 troops and other Defense Department personnel for crowd control and other duties.
It is likely that the G-20 will endorse the U.S. call for a new "framework for sustainable and balanced growth," but without any major way to enforce commitments made to restrain imbalances such as China's trade surpluses and the United States' surging budget deficits.
The G-20 is expected to agree to a peer review supervised by the International Monetary Fund. However, a similar pilot project launched with fanfare by the IMF in 2006 went nowhere.
Many believe that the imbalances earlier this decade, including a global credit glut fueled by China's trade surpluses, played a role in the subprime mortgage boom in the United States. The boom ended in a disastrous housing bust that led to the worst financial crisis in the United States since the 1930s.
But even without a credible enforcement mechanism, supporters of the approach contend that it can serve a useful purpose as a warning mechanism for countries pursuing inappropriate policies.
"This new framework is the key to resolving issues where different continents can better work together to achieve the growth level we need," British Prime Minister Gordon Brown said.
German Chancellor Angela Merkel, who will face German voters Sunday, and French President Nicolas Sarkozy have sought caps on excessive bonuses paid to bankers, which they contend end up rewarding risk-taking. Sarkozy has even threatened to walk out if the language on the bonus issueisn't tough enough.
But the French president has softened his initial demands, conceding after a summit of European Union nations last week that getting agreement on mandatory caps could be a problem.
Information for this article was contributed by Pan Pylas, Emma Vandore and Michael Fischer of The Associated Press.
Business, Pages 25, 26 on 09/24/2009