For anyone who listens to Larry Summers speak in person for the first time, it can be a conflicting experience. Last Thursday, as I sat in the elegant dinning room of New York City’s Cipriani Restaurant on 42nd street, where the top economic adviser to President Barack Obama was the keynote speaker at Bloomberg’s FX conference, it seemed clear that he was determined to give away nothing no matter how artfully Bloomberg’s Peter Cook twisted his questions. Dressed customarily in a black suit with a white shirt and a red tie, the once-outspoken economist is now an impenetrable politician, masterfully dodging tricky topics from the audience and faithfully defending the administration’s policies.
When Summers addressed the subject of financial reform, it was no surprise that he stuck to the official line. “If you are big enough and inter-connected enough, then some regulator will have the authority and responsibility to monitor your operations,” said Summers, looking thoughtfully while resting his chin on his hands. “If you want to have a financial system that is failure safe, it has to be safe from the failure of individual financial institutions.”
After some mundane mention of consumer protection, he continued talking about what was really important. “We clearly had an over-leveraged financial system, in which too little capital supported too much activity.” Thus laying the three principles of the Obama administration’s financial regulation reform: systemic risk, consumer protection and capital requirements.
Summers also discredited the idea of what’s called “the new normal,” a concept pioneered by the CEO of Pacific Investment Management Co., Mohamed El-Erian. The new normal stipulates that the post-crisis U.S. will undergo a sustained period of slow economic growth and high unemployment. Summers is no such pessimist. While acknowledging the unemployment rate is likely to be high for some time, he proceeded with the usual pep talk. “I would be reluctant to accept the idea that American companies no longer can fully employ America, very reluctant to accept that 10 percent unemployment rate has to be paid as a price,” he said with solemnity.
But the brilliant economist proved himself capable of chatty talk as well. He praised President Obama’s calm manners in face of good or bad news, claiming that working with President Obama is one of his best experiences. When asked by Peter Cook what keeps him up at night, Summers paused, and then said: “this interview with you today, Peter.”
With that, the audience burst in laughter.
Xiang Ji (Nina) is the capital markets reporter at Institutional Investor, covering mergers and acquisitions, debt and capital markets from an institutional investor’s perspective. Xiang Ji was formerly with BusinessWeek in China covering the wider business world. Send email to capitalbeat@iimagazine.com.
