Obama’s economic czar wants US to lead economic recovery

March 14th, 2009 - 12:38 pm ICT by IANS  

By Arun Kumar
Washington, March 14 (IANS) President Barack Obama’s top economic adviser wants the United States to lead a global effort to improve regulatory standards as the world grapples with its worst economic crisis in decacdes.

“Globally, the United States must lead a levelling-up of regulatory standards, not as has happened all too often in the recent past, trying to win a race to the bottom,” Lawrence Summers, director of Obama’s National Economic Council, said at a Brookings Institution forum.

Warning against allowing regulators to compete against one another” for the privilege of regulating particular financial institutions,” he said there should be no substantially interconnected institution or market that escapes regulatory scrutiny.

Summers said US Treasury Secretary Timothy Geithner in coming weeks will lay out the Obama administration’s regulatory reform approach, which will be taken up at an April 2 meeting of the Group of 20 leading economies.

Reforms should include requirements on levels of capital and liquidity that help to protect the overall financial system, even in very difficult times, he said.

“And there must be far more vigorous and serious efforts to discourage improper risk taking through transparency and accountability for errors.”

Summers, who served as Treasury Secretary under President Bill Clinton, touted the administration’s multi-pronged attack to stimulate the economy, help homeowners struggling to pay mortgages and relieve financial markets, but said it was unclear how long the fixes would take to work.

“No one can know just when and how its positive effects will be fully felt,” he admitted but said that he saw some early signs that the economic crisis could be beginning to ease.

He pointed to consumer spending, which collapsed during the holiday season but has stabilised more recently.

He also talked about how greed and lack of fear among Wall Street investors created a bubble, which has now deflated and sparked anxiety. “And this fear begets fear,” he added.

“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,” said Summers.”It is this transition that has happened in the United States today.”

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