Larry Summers Says Authorities Didn't Handle SVB Crisis Well: 50 Bps Rate Hike 'Probably ... Off The Table'

Former Treasury Secretary Lawrence Summers reportedly said the authorities did not do very well in handling the Silicon Valley Bank SIVB crisis.

In an interview with Bloomberg TV, Summers pointed out that this was the kind of thing that the authorities have been planning for since 2008.

"That’s what orderly resolution and all of that is about. That’s what capital that can be bailed in is about, that’s what larger quantities of capital and liquidity requirements are about. In a sense, we’re facing the first tests of the new regime and the new regime didn’t do so well with respect to SVB," he said.

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On Credit Suisse: Summers also believes Credit Suisse Group AG CS has had profound issues for a long time and that it's a much more complicated issue than SVB because the Swiss lender has complex global operations.

"There are multiple jurisdictions of regulation that are involved in dealing with it. So that’s clearly something that is going to require attention and I would assume that the regulatory authorities are in consultation with each other," he said.

Credit Suisse on Wednesday said it would exercise its option to borrow up to $54 billion (CHF 50 billion) from the Swiss National Bank.

Inflation Fight: On being asked whether the Federal Reserve and the ECB will have the courage to stay on course in their fight against inflation, Summers said if institutions don’t focus on their inflation mandate and appear to be abandoning concern about price rises they will be making a very serious mistake.

The former Treasury Secretary said he would assume that 50 basis points for March is now off the table.

"I think it probably should be off the table. But I would be concerned if the situation was judged such that they couldn’t do 25 basis points – that would be sending a very ominous kind of signal about how the central bank sees this situation," he said.

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