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Financial firms should not be able to choose their own regulator, White House economic adviser Lawrence Summers said on Monday.
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cnbc.com Lawrence Summers |
He said the practice of "charter flipping," in order to report to a particular regulator, encouraged lax standards, and higher capital and leverage rules were needed to make the financial system more resilient in times of crisis.
"We haven't seen the last bubble," Summers said at an economics conference.
Summers also said weak demand will weigh on U.S. economic growth for some time as heavy debt loads and high unemployment constrain household spending.
"We need to recognize that lack of demand will be a major constraint on output and employment in the American economy for the foreseeable future," he said in a speech.
Earlier Monday, U.S. President Barack Obama's top economic adviser said the United States is on the path toward economic recovery, conditions in financial markets are steadier and there have been initial signs of stabilization in the housing market.
"Thanks largely to the Recovery Act, alongside an aggressive financial stabilization plan and a program to keep responsible homeowners in their homes, we have walked a substantial distance back from the economic abyss and are on the path toward economic recovery," Summers said in a letter to be sent to Republican House Leader John Boehner that amounted to a defense of the Democratic Obama administration's policies on the economy.
"Most importantly, we have seen a substantial change in the trend of job loss," Summers said in the letter, which the White House said was written in response to a letter from Boehner to Obama, which it did not release.
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