By Caren Bohan
WASHINGTON (Reuters) - A top White House aide said on Thursday it was too soon to tell how Google's threat to leave China would affect U.S. ties with Beijing, but he said a free information flow was crucial to the Chinese economy.
"It seems to me that the principles that Google is trying to uphold are not just important in a moral or rights framework, but are also of very considerable economic importance," senior White House economic adviser Lawrence Summers told a small group of reporters.
When asked if the dispute with Google would mark a turning point in the U.S. economic relationship with China, Summers replied, "I think it's too early to assess what all of the effects will be."
He said that information flow is central as China's economy matures and transforms from an industrial-based economy to a more knowledge-based economy.
At the event, Summers, who is director of the White House National Economic Council, discussed the reasons the Obama administration settled on a fee on large banks as it considered possible options for taxing Wall Street to recoup taxpayer money spent on the financial bailout.
Some European countries have proposed a tax on financial transactions on the view that it could curb speculation and prevent a repeat of the 2008-2009 financial crisis.
Britain and France have both unveiled plans for taxing bonuses.
President Barack Obama earlier on Thursday announced a proposal to slap a fee of up to $117 billion on the biggest U.S. banks.
Summers said Obama and his aides chose the bank fee over the transactions tax and levy on bonuses because of the fee's "favorable incentive effects."
Obama's proposal calls for a levy of 0.15 of a percentage point on the balance sheets of companies with assets exceeding $50 billion.
Summers said the fee would discourage financial firms from becoming too big and taking excessive risks because larger and more highly leveraged firms would have to shoulder a bigger burden.
"Institutions, as they grow and take on more liability, would pay higher fees as well," he said.
Analysts are increasingly concerned that consolidations in the financial sector have heightened the risk of another crisis. The fear is that the large firms may be tempted to take on greater risks because they see themselves as "too big to fail."
Summers was also pressed on the administration's views on the structure of mortgage giants Fannie Mae and Freddie Mac.
He said the administration would be "thinking hard" about their structure long term, but its focus now is on the role of the companies in trying to stem the housing crisis.
"We are, of course, thinking about the long-term structure of the housing market and there's no question that the future of the housing market is going to have to be very different than the structure that led Fannie and Freddie to the point of conservatorship," he said. "But this is an issue that's going to play out over time."
Summers also said proposals for sweeping reform of the financial regulatory system were making progress and vowed a big push for passage of that legislation once Congress passes a healthcare reform bill.
"I think the process is moving along. This is something we're determined to do this year," he said. (Writing by Caren Bohan; editing by Mohammad Zargham and Cynthia Osterman)
