TORONTO: US President Barack Obama urged world leaders to follow his lead on regulatory reform on Friday while other countries touted their swifter progress in tackling debt mountains that threaten the global recovery.
Fresh off of an early morning victory when US lawmakers reached a deal on regulatory reform, Obama prodded his Group of 20 colleagues to make good on their own promises to clamp down on the risky behavior by banks blamed for unleashing the worst financial crisis in 80 years.
"This weekend in Toronto I hope we can build on this progress by coordinating our efforts to promote economic growth, pursue financial reform, and to strengthen the global economy," he said shortly before leaving Washington for Canada.
"We need to act in concert for a simple reason: this crisis proved and events continue to affirm that our national economies are inextricably linked."
While Obama can claim leadership on regulatory reform, the United States lags behind Germany, Britain and other countries in putting forward spending cuts to curb deficits. Other G20 conflict zones include trade and China's yuan currency.
British Prime Minister David Cameron downplayed the trans-Atlantic divisions but said smoothing out imbalances between export-rich countries and debt-laden consumer economies would require belt-tightening by America, too. "Part of dealing with the imbalances is for the worst deficit countries to roll up their sleeves, get on with the job and make sure they are living within their means," he said.
The G20 pledged last year to coordinate a string of reforms by the end of 2012 and Obama can boast he has met the bulk of those commitments with the United States a model to follow.
Europe has yet to come up with comprehensive rules.
"We are just not working in tandem and it's not good enough," said Peter Skinner, a British center-left member of the European Parliament which approves EU financial reforms. "This may ruffle a few feathers at the G20 this weekend."
Countries such as Canada and Japan, whose banks fared better during the financial crisis, have objected to some G20 reform proposals that they say unfairly punish banks that did not contribute to the upheaval.
Japanese Prime Minister Naoto Kan, in talks with German Chancellor Angela Merkel, said the reform debate should take into consideration each country's situation.
Brazilian President Luiz Inacio Lula da Silva was a last-minute G20 cancellation as he opted to stay home to deal with the aftermath of deadly flooding.
US lawmakers handed Obama a major domestic policy victory before his departure when they hammered out a historic overhaul of financial regulations at dawn Friday. In a marathon session of more than 21 hours, legislators agreed to a rewrite of Wall Street rules that may crimp the industry's profits and subject it to tougher oversight and tighter restrictions.
To secure agreement, lawmakers reached deals in the final hours on the most controversial sections which restrict derivatives dealing by banks and curb their proprietary trading to shield taxpayer-backed deposits from more risky activities.
Banks will be allowed to keep most swaps dealing activity in-house, although the riskiest trading would be pushed out. They will also be permitted small investments in hedge funds and private equity funds. The concessions could lessen the impact on bank profitability.
The most sweeping rewrite of financial rules since the 1930s aims to avoid a repeat of the 2007-2009 financial crisis, which touched off a global recession and led to taxpayer bailouts of floundering financial giants. Financial institutions would have to pay $19 billion to cover the costs.
The reforms must still win final approval from both chambers of Congress before Obama can sign them into law, giving Wall Street one final chance to deploy its army of lobbyists on Capitol Hill. Quick approval is expected and the reform could go to Obama for his signature by July 4.
Despite last-minute deals, the bill has actually gotten tougher in its yearlong journey through the halls of Congress. Democrats rode a wave of public disgust at an industry that awarded itself rich paydays while much of the country struggled through a deep recession caused by its actions.
"There is no way to view this bill as a positive for the financial sector," wrote Concept Capital analyst Jaret Seiberg.