Summers Urges Congress to Toughen Financial Oversight
Sept. 18 (Bloomberg) -- White House economic adviserLawrence Summers urged lawmakers to pass legislation that wouldtoughen supervision of the financial system, saying a failure toact swiftly would leave the economy vulnerable to anothercrisis.
“We believe it is critical to move rapidly while theevents of the last years are clearly in mind,” Summers said ina speech today at Georgetown University in Washington. He warnedthat “a failure to change the rules of the road will result infuture crises that will adversely affect the lives of millionsand cost taxpayers untold sums.”
The Obama administration is pushing Congress to enact themost sweeping overhaul of financial regulation in 75 years,seeking to tighten oversight of Wall Street after a series ofshocks that toppled major securities firms, froze creditmarkets and led to the worst recession since the 1930s.
The Treasury Department has proposed giving the FederalReserve greater authority over the capital, liquidity and risk-management standards of the largest financial firms.Congressional leaders haven’t supported the proposal and areconsidering giving broader authority to a council of regulators.
Summers, director of the White House’s National EconomicCouncil, said “a paramount objective must be to address theissue of moral hazard” that leads to excessive risk taking.
Consumer Protection
Summers also defended the Administration’s call for aconsumer protection agency for financial products against an adcampaign financed by the U.S. Chamber of Commerce that chargesthe idea would constrain small businesses from extending creditto customers.
He compared the ads to charges that Obama’s health-careplan would create “death panels” that would deny the elderlymedical care. Obama denounced those assertions as “a lie, plainand simple” in a speech to a joint session of Congress on Sept.9.
“I would suggest those ads are the financial-regulatoryequivalent of the death-panel ads that are being run withrespect to health care,” Summers said. “Those with an argumentmake it and those without a good argument try to scare people.And that is what is happening here.”
Summers added that the White House considered the consumerprotection agency a key element of its regulatory plan.
Obama ‘Determined’
“This is a critical issue,” he said. “It is one on whichthe president is determined.”
Summers defended the administration’s economic-stimuluspackage as a “necessary” step to revive the economy, eventhough it swelled the budget deficit. A key financier of theshortfall has been China, he said.
With about $801 billion in U.S. government debt, China isthe largest foreign holder of Treasuries.
“We have a substantial appetite to borrow and they have asubstantial appetite to hold reserves and lend to us,” Summerssaid. “That is a relationship that has been very substantiallyin our mutual interests and it has very much been a source ofsupport for both economies.”
To contact the reporter on this story:Mike Dorning in Washington at mdorning@bloomberg.net.
Last Updated: September 18, 2009 17:34 EDTSource: Bloomberg
