Larry Summers, the former Director of the National Economic Council under President Obama, criticized Gary Cohn, the current head of the NEC, on a number of fronts. During a recent interview in his offices at Harvard, Professor Summers—who is also the former president of Harvard and a former Treasury Secretary under President Bill Clinton—said Cohn’s remarks about the Trump administration’s proposals were “badly confused.”
Summers also said that Cohn’s claim that the Dodd-Frank Act costs banks hundreds of billions of dollars is “indefensible,” and he challenged the White House to produce evidence to prove that point. Furthermore, Summers called Cohn’s suggestion that regulating consumer finance is like banning unsafe food, “ludicrous.”
I asked Summers about deregulation of the financial sector, whether he is in favor of it, and if so, how much is the right amount?
“Sure, there’s issues that need to be fixed with respect to community banks. Sure, there’s areas where there’s probably too much bureaucratic complexity. But a wholesale revision of the kind that they seem to be talking about? Very, very—dangerous,” Summers said.
“I’m afraid that almost everything that new NEC Director Gary Cohn said as he introduced the Trump proposals was badly confused,” said Summers. “His claim that Dodd-Frank imposes hundreds of billions of dollars, is best I can tell indefensible and I’ve challenged the White House to produce any documentation for it. None has been forthcoming.”
“His suggestion that regulating consumer finance is like banning unsafe food, is ludicrous. We do after all require food labeling, and have for many years. And that’s what the work of the Consumer Financial Protection Bureau is all about,” said Summers. “The proposals to go back to too big to fail, by stopping the living will provisions that would enable the failure of a bank to be managed, I think are very irresponsible, and put taxpayers at risk. So, I can’t say I see anything in what’s been said so far about financial regulation, to find much encouragement in. And I’ve been a bit discouraged by the reckless, irresponsibility of some of the statements.”
Summers also called out Cohn for noting that he would remove himself from any policy or discussion that pertains to Goldman Sachs, where Cohn was until recently president.
Says Summers: “I was struck that it was announced that the head of the NEC, was going to recuse himself from any business with respect to Goldman Sachs. I have to say my reaction was, ‘of course.’ That was in every previous administration, it was the law that people recused themselves from the business they worked at before they went into the administration.”
“I certainly recused myself from anything to do with Harvard University. But it never occurred to anyone to issue a press release, announcing that fact, or to treat it as an event for extensive comment,” Summers said.
More from our interview with Larry Summers: