Summers: No Winners Or Losers In Financial Reforms
National Economic Counsel Advisor Larry Summers told CNBC Tuesday that President Obama's call for new regulations in the financial industry has no winners or losers and is more like a re-organization than creating new agencies.
"The Fed, for example, is going to lose its responsibilities in the consumer areas under this plan," Summers said in a taped interview. "The Fed's going to have to get more approvals from the Treasury secretary when it engages in certain kinds of lending activities than it has in the past."
As for how the new reforms will directly impact banks, Summers said the big institutions are going to be regulated on a comprehensive basis in a way that they haven't been in the past.
"There's going to be a system so that if an institution gets in trouble, it can be resolved—whatever size or type of financial institution it is," said Summers. "Institutions are going to be regulated in terms of their consumer function by a separate agency that's going to be focused on the interests of consumers. Those are some of the major changes."
Summers also said that the proposed regulatory reforms will mean more capital in the economy.
"We've proven in the last couple of years that with enough leverage, people can lose themselves and their clients any amount of money," said Summers. "And if this financial regulatory reform works, we're going to have less leverage and more capital in the system and that's ultimately going to mean more stability, it's going to be mean a healthier, less bubble-driven prosperity."
Summers also told CNBC in the interview:
On reforms for regulatory agencies—"I think you will see some important regulatory reforms and we'll see just how they evolve in the course of the legislative debate."
On cutting the budget deficit—If you look at the federal budget, the really important issue is not the way it expands during a recession, which is important for getting the economy out of the recession. That's why the stimulus bill that the president passed has already been important in bringing back a measure of confidence in the economy."
On whether the SEC or the Federal Reserve will have more power—"I think if you look at most of the agencies, they're going to gain something, they're going to lose something, they're going to have to cooperate more."
On possibly replacing Ben Bernanke as Fed Chairman—"I am very focused on working with the president as head of the National Economic Council and that is my only focus."