The government takeover of mortgage finance companies Fannie Mae and Freddie Mac shows the need for more government intervention in the financial sector, French Finance Minister Christine Lagarde told CNBC Europe in an interview.
"It only goes to show that nothing is ever certain in this world and that clearly we need to collectively rethink the moral compass that has driven the financial actors, the financial players and the financial markets," Lagarde said on Monday.
"I believe there is a need for government involvement; whether that should take the form of nationalization, of receivership, of whatever tools are available and whichever system is a matter for each national Treasury to decide," she added.
Stock markets rallied on Monday after the decision but on Tuesday jitters returned to the market, as investors sobered up to the fact that the Fannie Mae and Freddie Mac conservatorship is only a step towards solving the financial crisis and not the solution.
On Friday, France will host a two-day meeting of Ecofin group of European Union finance ministers, seeking a coordinated response to the credit crunch and the economic slowdown.
"I'm determined to propose measures to address some of these issues," Lagarde said. Her proposals will include demands for more transparency in the on oil market and the balance sheet of banks and financial institutions, as well as support for small and medium-size enterprises, which are a "key driver of growth" in Europe.
-- Written by CNBC.com