Leading article: Obstacles to financial reform

Much is still uncertain in the global banking crisis, but one thing most policymakers seem able to agree on is that oversight of the world's financial sector has been lamentable.

One of the lessons of the crisis is that no modern economy stands alone. Shocks are transmitted across borders at lightning speed. If capital flows are international, the bodies that monitor them – such as the IMF and the World Bank – need to be truly global too. The present shock has found them to be deficient in this respect.

So the logic of President Bush's call, after a meeting with the French President Nicolas Sarkozy at the weekend, for a series of talks between world leaders later this year on the subject, is perfectly reasonable in principle. Yet these particular meetings seem unlikely to produce significant progress towards better regulation of global finance, let alone the "new Bretton Woods agreement" that many believe is necessary.

The differences of emphasis in the weekend's comments by Mr Bush and M. Sarkozy have been remarked upon. The US President said that any new measures must not undermine the functioning of free markets. By contrast, his French counterpart stressed the need to stamp out "hateful practices" such as the activities of hedge funds. Some see such differences as a potential sticking point in talks. In truth, though, agreement on principles is likely to be the easy part. The argument on regulation has moved a long way in a few short weeks. The doctrinaire deregulators are discredited. The fact that even the US administration felt it necessary to ban the short-selling of financial stocks last month emphasises how much the game has changed with regard to powerful, unregulated players such as hedge funds.

The bigger obstacle is not one of principle, but politics. Mr Bush is a lame duck president, seeing out his final few months in power. He has no authority to launch a major new restructuring of the global financial system. Last month the President was unable even to persuade his own party to approve a rescue package for US banks. This is not the man to fashion a new Bretton Woods. As in so many other areas, the world needs a new American president before it can begin move on.