'This Week' Transcript: NEC Director Larry Summers

Those are opportunities to engage with China, to engage with other countries that have large trade surpluses, other countries who think they can continue to rely on the United States as an importer of last resort. And Secretary Geithner's judgment -- and I think it was the right one -- was that we could report and recommend to Congress, you know, a much more effective way after we had had those meetings and taken stock of what kind of measurable progress we were able to generate out of those dialogues.

But, look, at this point, given the seriousness of the recession that we have been through, given the number of Americans who are out of work, the economic issues have to be at the center and will be at the center of our diplomacy.

TAPPER: OK. The president has said he wants -- in the next few weeks, he wants the Senate to pass financial regulatory reform. First of all, just quickly, do you guys have the 60 votes to pass Senator Chris Dodd's bill on financial regulatory reform?

SUMMERS: I expect that reform is going to pass. It's not easy. You've got $1 million being spent per congressman in lobbying expenses on this issue. Industry has four lobbyists per member of the House and Senate working on this.

But the case for basic consumer protection, the case for regulating institutions that are able to bring the economy down and not leaving them completely unregulated, the case that we've got to be able to handle the failure of an institution without a major bailout through so-called resolution authority, the case that we can't let institutions choose their own regulator -- play one regulator off -- against another to reduce standards -- that case is so compelling that we are confident that a sufficient majority will see that case and will vote to support financial reform.

We've come a -- we've come a -- come a long way on this issue. We're now in the final stages. Our expectation is that we will get there, and there's no question, I mean, how can anyone take a position after what has happened, after -- I mean, it's not the first thing that's happened...

TAPPER: Well, some -- some -- some Democrats... SUMMERS: ... that we don't need -- that we don't need comprehensive financial reform.

TAPPER: Well, some...

SUMMERS: Probably (ph) work on the details, but not compromise on the principles.

TAPPER: Some Democrats say it doesn't go far enough. Here's Delaware Democrat Ted Kaufman talking about the Dodd bill.

(BEGIN VIDEO CLIP)

KAUFMAN: Unless Congress breaks up the mega-banks that are too big to fail, the American taxpayer will remain the ultimate guarantor of an almost certain to repeat itself cycle of boom, bust and bailout.

(END VIDEO CLIP)

TAPPER: Senator Kaufman is saying that there isn't being -- enough being done about too big to fail. In 2000, you said, quote, "It is certain that a healthy financial system cannot be built on the expectation of bailouts." Can you honestly say that the Dodd bill changes that?

SUMMERS: Yes, I can. It changes -- it reduces the expectation of bailouts by insisting that institutions have much more capital so they won't need to be bailed out. It eliminates the prospect of bailout by creating a framework in which a failure can be managed with creditors taking responsibility.

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