Summers Says Financial System That Causes One Crisis Every Three Years Demands Reforms
EmailABC News' Matthew Jaffe reports: Continuing the Obama administration's push for financial regulatory reforms, the president's top economic adviser today will say that any system that causes a crisis every three years – as the financial system has done for the past generation – must be revamped. "There is much in the way the financial system functions in America and around the world that is essential to preserve and yet the events of the last two years are the culmination of a remarkable sequence of financial problems," National Economic Council Director Larry Summers says in prepared remarks for the Economist's Buttonwood Gathering in New York City this afternoon. "Roughly every three years for the last generation a financial system that was intended to manage, distribute, and control risk has in fact been a source of risk, with devastating consequences for workers, consumers, and taxpayers." As evidence, Summers cites the Latin American debt crisis, the 1987 stock market crash, the savings and loan meltdown, the Mexican financial crisis, the Asian crisis, the collapse of Long Term Capital Management, the burst of the dotcom bubble, and the current financial crisis. "Surely a system that produces this many accidents and accidents this severe is a system that is very much in need of reform," he says. Over a year after the implementation of the $700 billion financial bailout and other government rescue measures, Summers says that "there is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system." "The time has come for fundamental change in the financial sector of our economy," he says, "both in how financial institutions conduct their business and how they are regulated." However, the financial industry has vigorously opposed a key element of the administration's proposed financial regulatory reform measures: the creation of the Consumer Financial Protection Agency. On the same day that the President speaks at a public service forum in Texas, Summers tells the financial industry to do their duty for the country and accept new regulations. The NEC chief admonishes the industry, saying, "Financial institutions that have benefited from government support can, should, and must use this moment to think about what they can do for their country, by accepting the necessary regulation to protect the American people." "The events of the past two years," he says, "should serve as a wakeup call for the financial industry." On Thursday the House Financial Services committee took a noteworthy step towards reform, passing a measure that would subject previously unregulated derivatives to new regulation, a move Summers praises and one, he hopes, will help break the recent pattern of a crisis once every three years. "It is our duty – for the government, the financial sector, and everyone else in this debate – to break this cycle and build a new, stronger, and more inclusive foundation for the American economy." – Matthew Jaffe
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“The events of the past two years,” he says, “should serve as a wakeup call for the financial industry.”
Sssshhhh. Congress is sleeping.
Posted by: Foghorn Leghorn | October 16, 2009, 12:25 pm 12:25 pm
Keep beating on the drum until something gets done. Make it a Grand Compromise in Congress – one bill that sets ration market regulations on finance AND audits the Federal Reserve. Get that bill written and let the grassroots take to the phones (the Left doesn’t fear an audit of the Fed, and the Right probably wants it enough to accept rational regulation to get it).
That’s how legislating used to be done, and if there are enough un-bought Congress critters left it’d be a home run.
Posted by: jhw539 | October 16, 2009, 12:34 pm 12:34 pm
Oops, “one bill that sets rationAL”
(Usually I leave typos, but that one could be misinterpreted!)
Posted by: jhw539 | October 16, 2009, 12:35 pm 12:35 pm
Good luck selling this idea!
Posted by: Jenny | October 16, 2009, 12:59 pm 12:59 pm
We need the central planners in Washington to fix our financial system so that it only goes up.
It really isn’t fair that some people are allowed to become very rich. The only reason they can do that in the first place is because capitalism is a flawed system that allows the greedy rich to exploit the working class. The government needs to step up and fix this too. We should use the tax code to spread the wealth around so that everyone is equal and to prevent the capitalists from making profits.
While we are at it, we should also impose a unilateral energy tax on ourselves to save the planet.
Oh and finally, let’s nationalize our health care industry to make sure everyone gets the same health care and to ensure those greedy insurance companies won’t make profits.
If we do all this, our economy will be much better off in the long run. And we will also be doing the right thing. After all, individualism is a dead ideology. Humans beings are lowly animals whose only purpose is to serve the greater good.
Posted by: marxmywords | October 16, 2009, 1:05 pm 1:05 pm
Would this be the same Larry Summers who offered his BRILLIANT explanations as too WHY men hold a higher proportion of engineering/science positions as compared too women, “there are issues of intrinsic aptitude and particularly of variability of aptitude….” Yep, another FINE Obama choice….
Posted by: Parallex View | October 16, 2009, 1:17 pm 1:17 pm
Would this be the same Larry Summers who offered his BRILLIANT explanations as too WHY men hold a higher proportion of engineering/science positions as compared too women, “there are issues of intrinsic aptitude and particularly of variability of aptitude….” Yep, another FINE Obama choice….
Posted by: Parallex View | Oct 16, 2009 1:17:16 PM
*********
obama only picks the best for his administration.
Posted by: Jenny | October 16, 2009, 1:29 pm 1:29 pm
Okay, so problems caused by governments meddling with the economy (Latin America, S&L, Mexico, Asia) are to be “solved” with more government meddling?
I used to think Summers was just in articulate with this points. Now I realize that he is woefully misinformed.
Posted by: Invisible Hand | October 16, 2009, 1:32 pm 1:32 pm
The American financial system collapsed and went into free fall after 8 years of the Republican Bush administration’s attempts to improve things by lowering taxes on the rich and deregulating. Thanks a lot.
Posted by: julieterra | October 16, 2009, 3:06 pm 3:06 pm
Undoubtedly brilliant, and a consummate insider, he may be one of few able to re-regulate our out-of-control financial system – since he was key in deregulating it as Sec’y of the Treasury in 1999-2001, it’s the least he could do to make amends. Go Larry.
Posted by: Robin | October 16, 2009, 5:27 pm 5:27 pm
Comstock Funds:
“The Bureau of Labor Statistics (BLS) recently announced that they will be making downward benchmark revisions to past monthly nonfarm employment data that casts doubt on the validity of the recent figures as well. As we will explain, it is highly likely that substantially more jobs are now being lost than is currently reported.”
Posted by: Fascist Hyena | October 16, 2009, 6:04 pm 6:04 pm
Hmn, and Ron Paul has been trying to audit the Fed for 30 years…. Maybe he is on to something… Maybe, we need to get rid of Bernanke and stop borrowing money from China to purchase goods we don’t need, and killing the job market in the 1st place… Ya think!?!
Posted by: jafo | October 16, 2009, 10:10 pm 10:10 pm
Just go read G. Edward Griffin’s book “The Creature from Jekyll Island – A Second Look at the Federal Reserve” to see where guys like Larry “Gibson’s Paradox” Summers fit into any “reform” of our fraudulent financial system.
Then consider writing to your Senator and urging him/her to support S604, the Senate version of Ron Paul’s House bill HR1207 to finally, after nearly 100 years, audit the books of the Federal Reserve.
HR1207 has wide bipartisan support, with over 300 out of 454 members of Congress signed on as co-sponsors. But, it still faces and uphill battle, because the money elite want it stopped or watered down.
You and I and every other person, organization and business can be audited by the government. Why not the Federal Reserve, a quasi-private banking cartel which has the sole monopoly power to literally make and lend out, at interest, all the money everyone else must use?
Posted by: MarkV | October 17, 2009, 3:18 am 3:18 am
ABC News’ Matthew Jaffe reports: Continuing the Obama administration’s push for financial regulatory reforms, the president’s top economic adviser today will say that any system that causes a crisis every three years – as the financial system has done for the past generation – must be revamped.
So what Summers is saying is that
President Bush was Not responsible
for last years economic crisis it was
bound to happen anyway!
If Obama had been president last year
the same thing would have happened.
Posted by: reaganfan | October 17, 2009, 2:24 pm 2:24 pm
It’s so sad when the wealthy people and the big companies (who have already hurt millions) fight back even harder against reform that could help stabilize this country. I say it’s all out war against aristocracy!
Posted by: DeepThinker4U | October 17, 2009, 7:31 pm 7:31 pm