news U.S. economic recovery is a "long road": Summers

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U.S. economic recovery is a "long road": Summers


Sun Apr 19, 12:02 PM





By Alister Bull



WASHINGTON (Reuters) - President Barack Obama's top economic adviser on Sunday tempered hopes for a speedy U.S. economic recovery, deliberately tamping down recent optimism that has driven the stock market to successive gains.


"We've seen some more mixed statistics after a period when there was no positive statistics to be found," White House Director of the National Economic Council Lawrence Summers told NBC's "Meet the Press."


"But it is a long road and it is going to take time. It is going to take creating jobs again ... it is going to take supporting the financial system," he said.


Data continues to show the country's severe recession is inflicting a lot of pain, with over 5 million jobs lost since it began in late 2007. But there have been scattered indications that the pace of economic decline is slowing.


Global stocks closed Friday higher for a sixth straight week and oil prices rose above $50 a barrel on the upbeat mood of consumers and improved quarterly earnings reported by some of the country's biggest banks.


Summers did not talk in detail about a battery of so-called bank stress tests, to which the country's top 19 firms are being subjected to restore confidence in the sector's health.


However, another senior member of the Obama team said that they did not believe more taxpayer money would be needed to bail out troubled lenders.


"Some are going to need resources. We believe that we have those resources available and the government is the final backstop to make sure the 19 are financial viable and effective," White House Chief of Staff Rahm Emmanuel told ABC's "This Week with George Stephanopoulos". "I believe we will not have to deal with nationalization," he said.


Bank stress test guidelines are expected to be released on April 24. with the actual results due on May 4.


A succession of public officials have voiced confidence that the economy was turning the corner in recent days. Summers said there was nothing wrong in talking about the recovery ahead, but emphasized the economy still faces challenges.


"No one is in any position to declare any kind of victory here. But the fact that no one can declare victory doesn't mean we shouldn't take note of developments as they unfold."


"But cautions that we have a long way to go, that there are still substantial risks, that there are downside contingencies that we have got to prepare for, that there are issues in the global economy, that there are issues in commercial real estate, that is right," he said.


Summers said the changing tone of the data showed the Obama emergency stimulus package was helping steady the economy.


Government action to protect the financial sector has also included massive injections of taxpayer money to shore up the capital position of its biggest banks, drawing harsh criticism from the public for bailing out rich bankers.


Some banks. including powerhouse Goldman Sachs, have since said they want to give the money back. Summers welcomed this in principle, but said that it must not be done if it meant putting bank balance sheets back under pressure or constricting the flow of new credit to the economy.


"We don't want people to be paying back the government in ways that will put them back in trouble." he said.


"Regulatory authorities are very open to being paid back. But it has to be done in a way that is consistent with the stability of the financial institutions, and it has to be consistent with maintaining the flow of credit," he said.

(Additional reporting by Paul Simoa and Ayesha Racoe in Washington, Editing by Jackie Frank)