By Al Yoon
NEW YORK (Reuters) - Top White House economic adviser Lawrence Summers on Tuesday urged businesses to embrace financial regulatory reform to prevent another severe economic crisis and ensure long-term health of their companies.
Summers, director of the White House National Economic Council, reiterated President Barack Obama's call for stronger financial regulation, including giving regulators the power to properly address the failures of large institutions and protect their customers.
He asked leaders of business and public policy at the Citizens Budget Commission's fundraiser in New York to accept the role of government in preparing for and responding to crisis. Business should support, rather than thwart the government in its efforts, he said.
"A strong government (that) responds to market failures, provides social protection regulates potential abuses and supports economic conditions is undeniably in the long-run interest of business," he said.
While Summers said he understood business antipathy, "history teaches us that active government is a necessary force," he added.
His pleas came as negotiations over financial reform dragged on in Washington, with strong disagreements on creation of a new government watchdog for financial consumers. Senate Banking Committee Christopher Dodd has been trying to bridge a gap with Republicans, who oppose an independent consumer protection agency, and discussed with Republican Senator Bob Corker the possibility of making the agency a division of the Federal Reserve.
Dodd has been expected to unveil revised financial reform legislation this week, with a possible vote by the banking panel in mid-March and Senate floor action in April or May.
To make his point, Summers suggested that few, if any, major financial institutions would have survived without the emergency liquidity offered by the government. It was just 18 months ago that leading companies were reduced to borrowing money overnight because they were unable to borrow for a week, he said.
The nine financial institutions benefited by the U.S. bailout fund today have a combined market value approaching $1 trillion, he said.
On comprehensive financial reform, he said "On one level, it's mind numbingly complex. On another, it's not that hard."
(Additional reporting by Kevin Drawbaugh; Editing by Tomasz Janowski)
