Washington President Barack Obama’s top economic adviser on Friday pressed for new restrictions on the biggest and most intertwined financial institutions and said the industry should not count on government to rescue them from crisis again.
“Our financial system will not be fail-safe until it is safe for failure,” said Lawrence Summers, the director of Obama’s National Economic Council.
Summers especially called on Congress to pass new requirements that would force large, super-leveraged institutions to have bigger cushions of capital to protect them if their risky transactions fail.
His remarks came just days before leaders of the top 20 economies meet in Pittsburgh where their responses to the crisis that brought financial systems to the brink last year will dominate discussions.
Summers decried the options the federal government faced last fall with Lehman Brothers and insurance giant American International Group. Lehman was allowed to succumb in bankruptcy, creating a panic across the system. AIG was bailed out with billions in government rescue funds out of fear that its demise would cause a cataclysmic chain of events.