Throughout an interview aired on Friday’s broadcast of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the Nationwide Financial Council underneath President Barack Obama, and Treasury Secretary underneath President Invoice Clinton Larry Summers said that the rescue bundle for First Republic Financial institution “was not an objective private sector assessment to have confidence in First Republic.” And “seemed a little corporatist and deal-based between the government and big banks to me.”
Summers stated, “It was JPMorgan and a number of other banks who were apparently corralled by the secretary and by JPMorgan. I don’t know what to make of it. The government has committed to put money in there at par above the market value of securities for a year. The fact that the banks made a commitment for 120 days so they can get out well ahead of the government at an interest rate that we don’t yet know what it is, with what the understandings in the agreement with the Treasury are. I suppose the fact that everybody’s acting will make people a little more confident. But it made me nervous. This was not an objective private sector assessment to have confidence in First Republic. So, I’m not sure what to make of it. It seemed a little corporatist and deal-based between the government and big banks to me. But we’ll have to see how it unfolds. And I hope there will be total transparency on all the understandings.”
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