Financial thoughts

European and Japanese finance officials rejected U.S. Treasury Secretary Henry Paulson's plea to help rescue troubled banks, as the Group of Seven nations pledged to step up efforts to mitigate the financial crisis.

“We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system,'' the G-7 finance ministers and central bankers said in a joint statement after a conference call today. Specific policies weren't mentioned.

Paulson is seeking international support as he presses Congress to pass a $700 billion plan to buy devalued mortgage- related securities from investment firms in an effort to keep the financial system from coming to a standstill. European and Japanese ministers balked at his proposal that they take similar action to aid their countries' banks.

“None of the other six G-7 members will adopt a similar program to the U.S.,'' German Finance Minister Peer Steinbrueck told reporters in Berlin after the call.

The statement said the countries “strongly welcome the extraordinary actions taken by the United States to enhance the stability of financial markets and address credit concerns, especially through its plan to implement a program to remove illiquid assets that are destabilizing financial institutions.''

The G-7 said other countries' actions to address illiquid markets were “strongly welcome.''

Yesterday, Paulson told ABC News's “This Week'' program that the U.S. authorities are “talking very aggressively with other countries around the world and encouraging them to do similar things, and I believe a number of them will.''

Tepid Response

That proposal earned a tepid response in G-7 capitals today as other governments continued to argue that their banks are in better shape than those in the U.S electronic check payday advance.

Paulson made his request after the Treasury modified its initial rescue proposal to allow institutions with “significant operations'' in the U.S. to receive assistance, potentially opening it up to banks with U.S. affiliates, such as Barclays Plc and UBS AG.

“The situation is not comparable to Germany's,'' Steinbrueck said.

French Finance Minister Christine Lagarde told BFM Television that she had “decided to take no other measure'' beyond banning short-selling practices.

Japan's Vice Finance Minister Kazuyuki Sugimoto said in Tokyo that he didn't “think it's necessary for Japan to set up a similar program to the U.S.'' U.K. Chancellor of the Exchequer Alistair Darling today acknowledged that while the financial crisis is “a global problem and it will require global solutions,'' it needed “not a knee-jerk reaction, but a measured response.''

More Regulation

The G-7 is composed of the U.S., Japan, Germany, France, Canada, Italy and the U.K. Its finance chiefs and central bankers are next scheduled to meet on Oct. 10 in Washington.

In their statement today, the officials said they recognized “the importance of making regulation more effective and bringing investors back into a liquid and stable marketplace.''

Central bankers have already cooperated. The Federal Reserve last week quadrupled the amount of dollars its counterparts can auction around the world to $247 billion in a bid to relieve a shortage of the U.S. currency in foreign markets. The French, British, German and American governments have also acted to bar short-selling of financial companies.

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