US market interventions 'temporary': Obama economic aide

By AFP

July 15, 2010 Updated Jun 14, 2009 at 9:41 PM CDT

US President Barack Obama's administration reiterated Friday that it was against nationalizing private enterprises, saying the market interventions it has taken were out of necessity and temporary.

Commenting on the government's massive capital infusions into banks and auto companies reeling from financial turmoil, Obama's top economic advisor Larry Summers said there was an "unequivocal recognition that we only act when necessary to avert unacceptable -- and in some cases dire -- outcomes."

Any interventions in private enterprises have been to "go with, rather than against, the grain of the market system," he told the Council on Foreign Relations, a New York-based think tank.

With the takeover of General Motors this month, the US government was firmly in control of some top US companies as officials stressed it was a stopgap measure and promised a hands-off approach.

Other top companies into which the government has pumped billions of dollars and took key stakes following the financial crisis resulting from a home mortgage meltdown were AIG, Citigroup, Chrysler, GMAC, Fannie Mae and Freddie Mac.

Summers, the director of the administration's National Economic Council, said that Obama had not run for office "to manage banks, insurance companies, or car manufacturers," adding that the moves to bail out the top companies were taken out of "necessity, not choice.

"Our objective is not to supplant or replace markets. Rather, the objective is to save them from their own excesses and improve our market-based system going forward," he said.

The interventions were "temporary, based on market principles, and minimally intrusive," he added.

Summers also slammed the financial system, saying it created risks that fueled financial turmoil.

Citing past crises from the 1987 stock market crash to the 1997 Asian crisis, he said "in each case, the financial system did not perform its intended function as a bearer and distributor of risk, but instead proved to be a creator of risk.

Summers said that Obama had made financial regulatory reform a central legislative priority in the early phase of his administration.

"While many of the details are complex, the necessary fixes come from the application of common sense in an area where complexity can blind sophisticated observers to the obvious," he said.

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