Identifier
Created
Classification
Origin
07HAMBURG62
2007-10-23 16:52:00
SECRET
Consulate Hamburg
Cable title:  

TREASURY DEPUTY SECRETARY KIMMITT SPEAKS WITH GERMAN FINANCE

Tags:  EFIN ECON ETRD GR 
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VZCZCXRO7236
PP RUEHROV
DE RUEHAG #0062/01 2961652
ZNY SSSSS ZZH
P 231652Z OCT 07
FM AMCONSUL HAMBURG
TO RUEHC/SECSTATE WASHDC PRIORITY 0182
INFO RUEHAG/AMCONSUL HAMBURG 0202
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRL/AMEMBASSY BERLIN PRIORITY 0169
RUCNFRG/FRG COLLECTIVE
RUCNMEM/EU MEMBER STATES
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0004
RUEHMO/AMEMBASSY MOSCOW PRIORITY 0009
S E C R E T SECTION 01 OF 02 HAMBURG 000062 

SIPDIS

STATE FOR E, EEB AND EUR/AGS
SIPDIS

E.O. 12958: DECL: 10/23/2017
TAGS: EFIN ECON ETRD GR
SUBJECT: TREASURY DEPUTY SECRETARY KIMMITT SPEAKS WITH GERMAN FINANCE
MINISTER ON SOVEREIGN WEALTH FUNDS, EXCHANGE RATES, AND IRAN


HAMBURG 00000062 001.2 OF 002


CLASSIFIED BY: Karen Johnson, Consul General, U.S. Consulate
General Hamburg, U.S. Department of State.
REASON: 1.4 (b),(d)



SECRET NOFORN

SIPDIS

S E C R E T SECTION 01 OF 02 HAMBURG 000062

SIPDIS

STATE FOR E, EEB AND EUR/AGS
SIPDIS

E.O. 12958: DECL: 10/23/2017
TAGS: EFIN ECON ETRD GR
SUBJECT: TREASURY DEPUTY SECRETARY KIMMITT SPEAKS WITH GERMAN FINANCE
MINISTER ON SOVEREIGN WEALTH FUNDS, EXCHANGE RATES, AND IRAN


HAMBURG 00000062 001.2 OF 002


CLASSIFIED BY: Karen Johnson, Consul General, U.S. Consulate
General Hamburg, U.S. Department of State.
REASON: 1.4 (b),(d)



SECRET NOFORN

SIPDIS


1. (C) SUMMARY: The main focus of Deputy Treasury Secretary
Robert Kimmitt's and German Finance Minister Peter Steinbrueck's
October 16 meeting in Hamburg was the creation of "guidelines"
or "best practices" for Sovereign Wealth Funds (SWFs). Both
Steinbrueck and Kimmitt agreed that the discussion for such
"guidelines" should take place in a multilateral forum. They
also agreed on a voluntary, industry derived set of "guidelines"
or "standards" for hedge funds. Steinbrueck reported that
France's push for G-7 statement on the euro/dollar exchange rate
would likely not be successful as the majority of Euro Group
members, including Germany, did not support this approach.
Kimmitt informed Steinbrueck that intelligence regarding German
banks' interactions with Iran would be passed to his staff. END
SUMMARY

AGREEMENT ON WAY FORWARD ON HEDGE FUNDS AND SWF PRACTICES

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2. (SBU) After hearing Steinbrueck's speech earlier in the day,
Kimmitt offered that past disagreements concerning a "code of
conduct" for hedge funds were largely due to a linguistic
misunderstanding and not a substantive difference. Americans
tend to view a "code of conduct" as being mandated from above,
whereas "best practices" or "guidelines" connote self
regulation. Both Kimmitt and Steinbrueck were in agreement that
such "guidelines" would work best if they emanate from industry
and are not mandated by governments.


3. (C) Referring to his talks with Russian Finance Minister
Aleksey Kudrin on October 15, Steinbrueck observed that Kudrin
has been moving very cautiously regarding SWFs. He noted that
Russia, which established a stability fund, does not want to be
compared with China. While Germany is interested in attracting
foreign investment, it needs to pursue a review regime in order

to prevent unwanted investment. However, Germany's priority is
to remain open to investment. Kimmitt replied that one should
differentiate between SWFs -- which historically have been
patient, long-term investors -- and state-owned enterprises,
which may represent a concern in some cases.


4. (SBU) The U.S. and Germany should not give the impression
that they are looking at SWFs differently now because China and
Russia have accumulated wealth recently. Kimmitt also stated
that he has noted a developing suspicion among APEC and G20
member state representatives that the G7 member states are
attempting to restrain them in the area of SWFs. This needs to
be avoided by supporting technical discussions in multilateral
fora. Steinbrueck supported the idea of discussing SWF best
practices and policies at the international level. Kimmitt also
stated that World Bank President Zoellick will want to be part
of the debate. He also spoke with OECD Secretary General Gurria
on a proposal to bring together the OECD, IMF and World Bank to
coordinate on best practices related to investment review
regimes and SWFs. Kimmitt stressed that investment barriers
will need to be kept as low as possible.

STEINBRUECK INTERESTED IN U.S. MORTGAGE MARKER

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5. (U) Steinbrueck also inquired on the status of the U.S.
sub-prime crisis. Kimmitt referred him to Federal Reserve
Chairman Ben Bernake's October 15 remarks in which he stated
that the housing market may put a drag on the U.S. economy
during the 2007 final quarter and into early 2008. Kimmitt
mentioned that while the mortgage market represented an economic
headwind, US economic fundamentals were sound.

FRANCE ALONE AMONG EURO GROUP ON EXCHANGE RATE VALUATION

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6. (C) Steinbrueck reported that in the most recent Euro Group
meeting, France stated that they would like a G7 statement on

HAMBURG 00000062 002.2 OF 002


the euro/dollar exchange rate. Steinbrueck said that was not
sure how the French would proceed and he assured Kimmitt that
the majority of the Euro Group, including Germany, did NOT
support France. Both agreed that France was pursuing a
troubling path and that G7 countries should focus on structural
constraints not nominal exchange rate valuations.

SECOND TIER GERMAN BANKS FILLING BUSINESS VOID IN IRAN

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7. (S) Before ending the meeting, Kimmitt informed Steinbrueck
that the Treasury Department had passed intelligence on German
banks' interactions with Iran to his office and to German
intelligence agencies. Kimmitt told Steinbrueck that second
tier German banks (BHF and DZ) were filling the business void
left by Deutsche Bank and Commerz. He requested that
Steinbrueck look closely at the information. Steinbrueck
promised to do so upon his return to Berlin.


8. (U) This message has been cleared with Deputy Secretary
Kimmitt.
JOHNSON