Regulators both have helped stabilize the banking system and cut off ways for institutions to keep themselves afloat should a crisis hit, economist Larry Summers said Thursday.
The dichotomy has left the system overall just as prone to a collapse as it was eight years ago Thursday when Lehman Brothers fell and set off a global panic, the former White House advisor told CNBC's "Closing Bell."
"If banks were much better capitalized and much less levered than they used to be, you would expect that you would see their equity would become much less volatile," Summers said.
However, that hasn't been the case.
A Harvard paper Summers co-authored and presented Thursday contends that alternative measures that go beyond simple capital ratios show a system that still carries risk. Slapping regulations on banks to prevent them from engaging in certain types of risk practices can only go so far, and to some extent may have harmed the system.
"I don't think that one can simply be complacent and assume that we've now created some kind of system where because we measure less leverage in regulatory context we can assume that the institutions are far safer," Summers said.
"Some parts of regulatory efforts have operated to remove many sources of income for banks, and that has had the perverse effect of when you have reduced future income, your safety declines," he added. "You have to look at the contents of regulation and not just the quantity of regulation."
The paper is co-authored by Natasha Sarin and was scheduled for presentation at a conference Thursday. Summers has served under multiple presidents, including as Treasury secretary under President Bill Clinton and heading the National Economic Council for President Barack Obama.