Welcome to the FT View From the Top ‘Future of Finance’ conference in New York. We will have live updates throughout the day from speeches and discussions featuring Larry Summers, Gerald Corrigan, George Soros, Joseph Stiglitz, Mohamed El-Erian and Robert Rubin. Posts will roll from the bottom up and all times are Eastern Standard.
The first session of the day starts with a keynote address by Larry Summers, Barack Obama’s senior economic adviser, with a question and answer session following. Mr Summers called on the US to invest more aggressively in domestic infrastructure projects, calling it a “macroeconomic imperative” to capitalise on low borrowing and construction costs and the opportunity to spur demand.
10:11am – That concludes Mr Summers’ remarks. Now on to “Redefining the Role of Banking”.
10:04am – Mr Summers is asked about how to prevent populist rage leading to harmful protectionism. He acknowledges that there is plenty to be anxious about but says that in terms of protectionism things have not been as bad as one might have expected considering the economic backdrop. Also, he says that people have a tendency to “internalise credit and externalise blame” and that they tend to blame things like trade for their misfortunes.
9:59am – Revitalising the nation’s community college system is a top priority for the Obama administration’s strategy for creating jobs. Healthcare and energy technology are key areas where increased training will be desirable, Mr Summers said.
9:53am – Questioned about fiscal consolidation, Mr Summers said he is inclined to avoid answering. However, he points to reduced healthcare costs and discretionary spending and the issue of revenues and the permanence of the Bush tax cuts. He says that this is the wrong time to do so given the how the very rich do not have the propensity to spend and how much tax revenue the US would be losing. He did say that the US tax expenditure budget should be subject to rigorous review.
9:51am – Mr Summers is finished with his remarks and is about to take questions from Gillian Tett, US managing editor of the FT, and the audience.
9:46am – Mr Summers suggests that those in the financial system recognise that they have obligations to support the system. He scolds the industry for spending $1m per member of Congress lobbying against the bill and says that makes him sympathetic for those who criticise the industry. He condemns misleading ads that told voters they would not be able to keep tabs at their florists if FinReg was passed and asks for more honest airing of opposing views.
On measuring success, Mr Summers discusses his daughters studying for history exams and learning of the Great Depression. “If this period and is financial dimensions was not the subject of history books in 2040, then we will have fundamentally succeeded. I believe that things are moving in that direction,” Mr Summers said.
9:42am – On financial regulatory reform, Mr Summers said the Dodd-Frank financial reform bill substantially reduces the risks of future crises because such a bill, in retrospect, would not have left the subprime mortgage market unchecked. Tougher capital requirements would have given banks bigger cushions, clearing houses would have provided derivatives transparency and a resolution authority would have made it easier to handle the collapse of firms like Lehman Brothers.
9:39am – Low borrowing costs, high construction unemployment levels and cheap building costs make it “a long-term imperative and a short-term macroeconomic imperative” to increase infrastructure investment, Mr Summers said.
9:34am – Exports will lead the recovery, as the global economy grows, Mr Summers said. The US must remove self-inflicting barriers to exports and to move forward with trade deals with South Korea and with the Doha round of trade talks. Next, the US must spur “productive” investment – he points to the iPad, a device that did not replace anything that he owned but opened new opportunities. Further, public support for investment demand must grow.
9:30am – Sounding optimistic tones, Mr Summers said that expected housing prices for the end of 2010 increased by nearly 20 per cent from winter 2008 to 2009, signalling growing confidence in the economy. “We are in far stronger shape than could have been imagined two years ago,” Mr Summers said. However, he said that large overhangs still exist in the housing sector, consumer durable goods such as cars and factories are not being fully utilised in most sectors.
9:25am – Mr Summers said that the government’s investment in AIG will likely provide a “substantial” profit for taxpayers.
9:20am – Expounding on Tarp, Mr Summers said that given how painful financial institutions found it to be partners with the government, they felt enormous pressure to repay Tarp capital quickly. That made it ineffective at supporting balance sheet expansion and only indirectly effective at spurring lending.
9:16am – The recovery act and infusion of spending power was crucial to stopping declines in employment and income. “Of central importance is the little-mourned Tarp programme,” Mr Summers said. Cumulative costs of resolving the financial crisis appear to be low, he explained, compared with the Savings and Loans crisis in the 1980s.
9:12am – Larry Summers is starting off the day with a keynote address and recalls how two years ago there were doubts that finance had a future. He’s outlining the strategy the Obama administration has used to rehabilitate the economy. The crisis reflected “multiple reinforcing vicious cycles”, he said, pointing to lower asset prices, a weakened financial system and fear and panic.
Alan Rappeport is a Financial Times reporter in New York
