Summers: ‘long road’ to economic recovery

White House Economic Council Director Larry Summers is encouraged by the current economic situation but cautioned Sunday that there is a “long road ahead” before the financial crisis is over.

In an interview on Fox News Sunday, President Obama’s economic adviser told Chris Wallace that the sense of an “unremitting freefall that we had a month or two ago” with the economy is no longer present.

{mosads}”There are some negative indicators, to be sure. There are also some positive indicators,” Summers said “And no one knows what the next turn will be. But I think that sense of unremitting freefall that we had a month or two ago is not present today. And that’s something we can take some encouragement from.
 
“But it’s going to be a very long road. There are going to be steps forward, and there are also going to be steps backwards.”

Summers said the White House has “set the framework” for the banking system to recover. On Friday, the government began meeting with banks to discuss the results of stress tests on bank balance sheets. The results could lead the government to give more money to some banks, but could also lead to some institutions removing themselves from the bailout program.
 
But Summers said it will take time for the economy to improve, and he predicted unemployment would continue to rise despite Obama’s $787 billion stimulus package.

“Experience suggests that even strong policies, very strong policies like the ones we’ve enacted with the Recovery and Reinvestment Act, with the president’s financial stability plan, with the president’s measures to provide for refinancing of mortgages — that even strong plans take time, take six months or more, to have their impact on the economy,” Summers said.

Wallace pressed Summers on the status of negotiations to create a viable long-term plan for Chrysler auto company, which likely depends on it successfuly concluding negotiations with unions and bondholders to form a merger with Fiat by Thursday.

According to Summers, the administration is “hopeful” that Chrysler will make the deadline without declaring bankruptcy but notes that “there are multiple contingencies,” at work.

“It’s in everybody’s interest to see these negotiations succeed and we’re hopeful that they will,” Summers said.

If Chrysler has to declare bankruptcy, however, the administration remains hesitant to bailout out the ailing auto company.

“The president’s greatest fear and most Americans would share his view, [is] that you’ve got to have responsibility and you’ve got to have accountability and you can’t have a situation where companies proceed on a permanent basis relying only on cash from the government.”

Summers also discussed the president’s meeting with with the heads of 14 credit card companies on Thursday. Obama at the meeting pressed the companies to take steps to help consumers.  

Summers created buzz at Friday’s meeting when he was caught on film dozing off during the president’s remarks. He joked that he “was thinking about the fine print on some of those credit card disclosures, which is written boring enough to put you to sleep. And President Obama wants us all to fulfill our American dreams, and I guess I was starting that day.”