'This Week' Transcript: Larry Summers & Mitch McConnell

STEPHANOPOULOS: So, again, there's nothing that can be done about it?

SUMMERS: No, there are things -- there are things that can be done. That's why, in the context of financial regulation, we're working to put all these derivatives on exchange, and so it can all be netted out across all the parties, rather than simply being a contract that somebody is saying has to be -- has to be enforced. STEPHANOPOULOS: But to be clear, the president would like to know who got these funds, and you believe that there should be a haircut?

SUMMERS: I believe that, in principle, in situations of this kind, there should be a framework that permits -- that permits haircuts, so that the situation can be worked forward.

And Secretary Geithner, as he works on financial regulation, is focused on that -- achieving that objective. But there's a very different situation...

STEPHANOPOULOS: Going forward, not looking back?

SUMMERS: That's a different situation than saying that we can just change the rules -- change the rules ex-post.

Look, if you start changing the rules, ex-post, on financial -- on these kinds of contracts, you may get a feeling of satisfaction in the short run. But the president said something very, very important, George, in his State of the Union speech.

He railed and spoke very powerfully against what has happened. And then he said, "but we can't govern out of anger."

And what's being done here -- no one wants to be doing these things. No one wants to see money going for this purpose, with all the needs that our country has.

But at the same time, if we don't contain this situation; if we don't respect laws on which people reasonably relied, the potential chaos, disruption, lack of credit, resulting unemployment will be that much greater. Those are the agonizing judgments that our financial authorities have to make.

STEPHANOPOULOS: You say we can't govern out of anger. You and the president were also trying to inspire hope, this week, on the economy; some signs of some progress, and of course, that move in the stock market this week.

Is an economic bottom in sight?

SUMMERS: George, no one can make that -- no one can make that judgment. You know, the president said something else that was very wise. He said, you know, "It's never as good as people say it is when they say it's good and it's never as bad as people say it is when they say it's bad."

Clearly, the fact that consumer spending was like a ball falling off a table through the holiday season, and that there does seem to be some sign of stability in January and February is better than if that were not the case.

But we've got an economy that's losing 600,000 jobs a month. That's probably not going to stop imminently. And so, while there is signs that some of the things that the president is doing are starting to have effects, these problems did not get made overnight. They didn't get made in a year. And they're not going to get fixed very rapidly, either.

But what we have to do is put in place a program. And the president is doing that, with jobs, with housing, with the flow of credit; tomorrow, with small business, to put in place a program that addresses the crucial problems and permits stability to be -- to be regained. But it's going to take some time.

STEPHANOPOULOS: How about the news on the banks, specifically?

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