Summers Criticizes Minneapolis Fed President's 'Too Big to Fail' Push

ST. LOUIS—Former Treasury Secretary Lawrence Summers on Wednesday sharply criticized the "style and tone" of Federal Reserve Bank of Minneapolis President Neel Kashkari's recent push to address whether taxpayers may have to rescue the biggest U.S. banks in the future.

Mr. Kashkari, a senior Treasury official during the financial crisis who became president of the Minneapolis Fed in January, said in a February speech that postcrisis financial reforms didn't go far enough to prevent future government bailouts and floated the idea of breaking up the biggest banks. Mr. Kashkari on Monday hosted a high-profile symposium on "Ending Too Big To Fail" in Minneapolis.

"I thought President Kashkari's first speech on the topic was one of the two or three most blatantly political things...that I've seen come from a prominent Federal Reserve official in the last 15" years, Mr. Summers, a former candidate for Fed chairman, told reporters Wednesday before delivering a lecture at the St. Louis Fed. "I did not think the style and tone and degree of collaboration with others was the kind of thing one could expect from the Fed."

Mr. Summers, a Harvard University economist who served as Treasury secretary under President Bill Clinton, said, "There is no question that Dodd-Frank is a place to start, not a place to finish, in achieving financial stability." But he added that he "would far prefer an inquiry that stayed a little further from sloganeering."

Minneapolis Fed spokesman David Wargin said in an email: "This is not about politics but about addressing a major issue facing us today. We would welcome Dr. Summers' participation in our upcoming symposium to share with the public his analysis of why [too big to fail] is no longer a problem.‎"

Mr. Kashkari, a Republican candidate for California governor in 2014, has said that "if I had any aspiration to run for office again, this is not what I would be doing." He also said that "Wall Street critics and the lobbyists are reduced to trying to criticize the process or criticize my intentions because they can't argue with me on the substance."

St. Louis Fed President James Bullard attended Monday's conference in Minneapolis and was supportive of Mr. Kashkari's recent work, noting on Wednesday that it has been more than five years since the Dodd-Frank financial reform law was enacted.

"I don't think we should just automatically say, well, we passed a law and therefore everything's going to work out well in the future," Mr. Bullard told reporters. "I think it's probably a good moment to reflect on what the state of affairs is, so I applaud Neel Kashkari for taking on this project."

Write to Ben Leubsdorf at [e-mail]

(END) Dow Jones Newswires

April 06, 2016 21:15 ET (01:15 GMT)

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