Former U.S. Treasury Secretary Summers said on Thursday that he was more concerned about the ongoing turmoil in the U.S. financial sector than the dispute between Democrats and Republicans over raising the federal debt ceiling.
“Most of the banking trauma seems to be over,” Summers said in an interview with Bloomberg Television. “There is no strong alarm about what is happening in the banking sector,” he said.
A big sell-off in U.S. stocks on Thursday suggested investors continued to worry about the future of many financial institutions after the rescue buyout of First Republic Bank was finalized over the weekend.
Summers said there are still concerns about commercial real estate losses and their impact on “multi-agency credit quality.” The Harvard professor makes regular appearances on Bloomberg Television.
“We need to take a broader view on this issue,” he said, adding that there were “all grounds” to expect deposits in the banking system to be “protected.” But he said the government had shown that shareholders would “get no cut” in banks that had been mismanaged and had their capital wiped out, increasing the risk of investing in some banks.
“I’m more concerned about what’s happening in the political sector,” Summers said of Congress’ failure so far to raise or suspend the federal debt ceiling. He added that it was clear that there was very little time left before “something very serious would happen” if Congress did not act.
news-rsf-original-reference paywall">Original title:Summers Says Most Bank Trauma Over, More Worried on Debt Limit(excerpt)
2023-05-02 21:17:00
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