The United States should rethink domestic and global financial regulation, Lawrence Summers, director of the White House's National Economic Council, said on Friday, outlining six imperatives.
There is every reason to believe that pure market solutions are not viable, Summers told a Stanford Institute for Economic Policy Research conference.
The speech comes against the backdrop of a debate over how much regulation and in what form would best cut risks of another Wall Street crisis or massive failure of the financial system.
Summers said there were signs of improvement from a year ago but that much work remained to right the economy.
Unemployment is at unacceptable levels and it will remain at unacceptable levels for a substantial interval, he said. But, he said, the previous sense of free fall was gone.
Summers gave six imperatives for policy in financial regulation:
* Comprehensive regulation of all systemically important institutions
* Procedures for managing failures of even the biggest institutions
* Raise and make comprehensive higher capital requirements, and restrictions on leverage, and requirements for liquidity.
* Americans should be compensated for giving assistance to institutions
* Over-the-counter derivatives and swap transactions, sophisticated financial instruments associated with the Wall Street crisis, should require use of a clearinghouse or exchange where possible to increase transparency and stability
* Institutions that benefit from the government's safety net should face restrictions on activities.