Summers: 'Excess of fear' about economy must be broken

WASHINGTON -- President Barack Obama's top economic adviser says the crisis in the financial sector has led to an "excess of fear" that must be broken to reverse the economic downturn.

"Fear begets fear," Lawrence Summers, the president's director of the National Economic Council, told a forum.

"It is this transition from an excess of greed to an excess of fear that President Roosevelt had in mind when he famously observed that the only thing we had to fear was fear itself," Summer said. "It is this transition that has happened in the United States today."

Summers spoke as the government reported continuing signs of recession. The U.S. trade deficit plunged in January to the lowest level in six years as the economic downturn cut America's demand for imported goods, the Commerce Department said Friday.

Summers said it's still too early to gauge the impact of the president's recovery program.

"But it is modestly encouraging that since it began to take shape, consumer spending in the U.S., which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized," Summers told the Brookings Institution, a think tank.

Summers was asked by a member of the audience what the nation's business community could do to help speed the recovery.

"What we need today is more optimism and more confidence," Summers said.

"Those who have sound long-term stragegy, who have investments that they want to make, who see productive opportunities, are going to find this a very good moment to make those investments," he said. "There are a very large number of things that are on sale today. Think about the cost of doing construction today, versus the cost of doing construction two years ago.

"My advice to business leaders is not to foreshorten the horizon at a moment like this."

He said an abundance of greed and an absence of fear precipitated the excesses that led to the meltdown that froze credit.

Summers said it is "modestly encouraging" that consumer spending appears to have stabilized after collapsing during the holiday season.