Asking questions of Larry Summers

By Felix Salmon
April 14, 2009

Larry Summers just gave an interview to CNBC’s Maria Bartiromo in which neither side was particularly impressive. Bartiromo managed to go the entire interview without asking Summers about about the fact that he seems to be bought and paid for by Wall Street. And Summers proved himself incapable of even answering Bartiromo’s softballs:

BARTIROMO: And it leads me–it leads me to sort of a more thoughtful, broader idea here, and it feels like there’s a bit of a competition going. On the one hand, the government is saying to the banks, `Look, you need to lend more,’ lend, lend, lend, get the credit moving again,’ since credit has been stripped in this economy, literally, five quarters. On the other hand, the government is saying, `We’re performing stress tests and you need to get your capital levels at an appropriate level.’ So why would a bank lend when they know that they’ve got to get their credit level–they’ve got to get their capital levels up?

Mr. SUMMERS: Well, I think the focus of the stress test is going to be on levels of capital rather than capital ratios. And so the focus is going to be on making sure that institutions raise capital or take other kinds of steps to assure that they have capital that enables them to support their existing loans and puts them in a position–puts them in a position to expand. And that’s really where focus–really where the focus is going to be. Nobody’s looking to use the stress test as a vehicle for forcing institutions to deleverage and reduce their lending activity. Rather, the action’s going to be on the capital side, and that’s where you’re supporting a stronger economy and more lending that enables more growth.

“The focus of the stress test is going to be on levels of capital rather than capital ratios” means nothing — it’s utter blather. Summers, here, is simply bloviating: he’s not even attempting to answer the question. Does the government want the banks to lend freely, or does it want them to hunker down behind fortress balance sheets with vast amounts of tier-one capital? You’ll get no insight from Larry Summers on that front.

But at least he’s smart enough to pick an interviewer who won’t ask him the really tough questions, like whether his actions as Treasury secretary helped to pump up the financial-services bubble whose implosion we’re all now suffering through, and whether he owes the American people an apology. Instead, he’ll continue to simply ignore the irate.

More From Felix Salmon
Post Felix
The Piketty pessimist
The most expensive lottery ticket in the world
The problems of HFT, Joe Stiglitz edition
Private equity math, Nuveen edition
Five explanations for Greece’s bond yield
Comments
3 comments so far

Perhaps one day we can have an interview with Larry conducted by a friendly panel – say
Chris Whalen, Jim Grant and Simon Johnson (or any others you might like to suggest-
(Roubini, Taleb, Martin Mayer……..)

Posted by Robert Kahn | Report as abusive

Ah Larry, blow a little more sunshine up America’s collective ***. Maria, you little hottie, it was actually a decent question, as timid as it was. Sadly, it’s one of the more penetrating questions I’ve seen asked by the MSM… usually they entirely roll over and play dead. Team Obama has no intent to tell us what their real game is. I still think he was the better choice but jumpin’ jehosaphat… any politician is overmatched.

Posted by AmericanFool | Report as abusive

When did Mario ask anyone anything but a softball question. Part of the crisis was created by CBNC and all their models,…I mean journalists.

Posted by stochos | Report as abusive
Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/