US: Obama to target wayward finance sector: Summers
20 Apr 2009 2:24 AM
WASHINGTON, April 19 AFP - With the recession-hit US economy still facing "substantial" downside risks, President Barack Obama is planning to rein in the wayward financial sector, which has been blamed for the economic meltdown, a top White House adviser says.
Obama's chief economic adviser, Larry Summers, told NBC television on Sunday the US leader "is pushing very hard for a very strong program of regulation ... that is going to be very focused, in a very near term, on a whole set of issues that have to do with credit card abuses."
The new regulations will target, among other concerns, "the way people have been deceived into paying extraordinarily high rates that they wouldn't have paid if they knew what they were getting themselves into," Summers said.
While there have been early signs of economic revival, "we have got a long way to go", Summers told NBC, adding that the administration is mindful that "there are still substantial risks, that there are downside contingencies that we've got to prepare for, that there are issues in the global economy, that there are issues in commercial real estate."
His words echoed remarks last week in which Obama alluded to "glimmers of hope" as America battles the deepest economic slump in generations but warned of painful choices and more deep job cuts to come.
There also are rising fears the US economy could face defaults on billions of dollars in consumer credit card debt, inflicting another massive blow on the heels of the home mortgage crisis.
US banks are accused of having drastically increased interest rates and fees on credit card users, even though many of the credit companies have received federal assistance intended to encourage them to loosen lending.
Obama's chief of staff Rahm Emanuel on Sunday hailed the steps taken so far to right the US economy, just 90 days into Obama's young administration.
"First, we passed the largest recovery act to put Americans back to work. We've gotten in place the financing to help stabilise the credit system throughout the financial system," as well as "a housing plan so people can keep their homes, and millions of Americans can refinance", he said.
He said the administration "also started the credit flowing to small businesses" and freed up educational loans for college students.
"It's quite a lot to take on, but the American people asked for us to roll up our sleeves every day and get to work on behalf of them."
Emanuel said he did not believe it would be necessary to ask Congress for more money to bail out ailing US banks, as the government prepared to reveal details about the health of 19 ailing US banks following the completion of a set of "stress tests" on the industry at month's end.
"We believe we have those resources available in the government as the final backstop to make sure that the 19 are financially viable and effective," Emanuel said.
"We have a facility to buy these troubled assets off their banks. If they need capital, we have that capacity."
Meanwhile, Summers said on the margins of the regional Summit of the Americas wrapping up on Sunday that Obama was also seeking to reduce the economic upheaval caused when "an institution gets itself into a situation where it becomes, itself, a source a risk to the whole financial system."
"We're going to need a less leveraged economy," the senior US economist said. "That means ... a much better regulated financial system, and that's what the president is already hard at work on.
"Individuals are going to have to save more," and said at the same time "we are going to need a government ... (which) is a contributor of savings to the economy, rather than a drain," said Summers.
"Those are all objectives we're working towards in the long run."
Summers noted that in contrast to just a few months ago "when everything was negative", there is "now some mixture in the indicators".
All the same, he said, "we don't know what we don't know: We can't know with certainty what's going to happen next, and there certainly are real risks ahead."
