0 DRAFT COMMENTS WELCOME. Managing Financial Emergencies in an Integrating World

Financial risks as well as opportunities now flow more freely across the borders of all but the poorest countries in the world. But globalizing finance became an observable fact before fully adequate political structures were in place to steer it. The basic proposition that robust financial markets both rested on and reinforced the legitimacy of state power was decisively tested during the Great Depression. It is being tested again today. A turning away from open markets is possible. Certainly an apparent turning inward occurred as states used national fiscal resources to bail out troubled intermediaries. Strengthened home-country control of more tightly regulated financial intermediaries is more likely. But also likely is an expansion in host-state authority over the local operations of intermediaries headquartered elsewhere. In this context, both home and host states find themselves confronting the need to bolster networks of official collaboration in order to stabilize markets still significantly shaped by large, complex financial institutions. Even if direct acknowledgment by national authorities remains problematic, such collaboration now involves deeper fiscal interaction. Ironically, autonomous policy-making capacity in this most sensitive political arena cannot achieve desired objectives unless it is more intensively pooled