National Economic Council Chair Larry Summers gave a speech today about the administration's economic strategy, which should be of interest to folks. Most of it is a recapitulation of recent decisions, but Summers does look ahead to the upcoming financial regulations overhaul, which debuts on June 18th with Treasury Secretary Tim Geithner's testimony before the Senate Banking committee. Summers outlined five areas where the administration would be focused: Systemic risk, resolution authority, capital adequacy, regulatory arbitrage, consumer financial protection. While there's not a lot of detail, the first principles sounded right to me; although the presence of a systemic risk regulator at first makes me concerned: the idea of a systemic risk regulators means, in part, that you expect institutions to be big enough to become systemic risks, in other words, too big to fail.But then Summers said this, which brightened my day a little: "I would suggest to you that we will not have a financial system that is failsafe until we have a financial system that is safe for failure." Sure thing! But no one should get their hopes up for the big reveal on the eighteenth -- political will for fundamental reform is sapping at an unsurprising but depressing rate -- but we shouldn't prejudge the administration's efforts, either. There are so many variables in these kinds of regulations, and so many ways it can be strong or weak, that it's hard to jump to conclusions. Consolidating different regulators can be good or bad depending on how and what agencies are consolidated; similarly, new resolution authorities are a good idea -- unless they merely formalize the TARP program's capital injections.Further Reading: Bossman Bob Kuttner on approaching financial oversight. -- Tim Fernholz
