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Obama Correct to Resist Financial ‘Terrorism,’ Summers Says

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U.S. President Barack Obama
U.S. President Barack Obama. Photographer: Joshua Roberts/Bloomberg

July 20 (Bloomberg) -- President Barack Obama is correct in resisting financial “terrorism” in the debate over budget cuts and the debt ceiling, former U.S. Treasury Secretary Lawrence Summers said today.

“Is the president right to not yield to terrorism?” Summers, a professor at Harvard University, said in an interview on Bloomberg Television’s “InBusiness with Margaret Brennan.” “Yes, the president is absolutely right to not yield to threats to send the country into default. You can’t run the country that way.”

Summers, 56, who served as head of the National Economic Council under Obama until December, did not name those he believes are financial terrorists, nor did he explain the reference further. House Republicans last night passed legislation, which Obama has said he would veto, tying an increase in the debt ceiling to approval of a balanced-budget amendment to the Constitution.

Obama yesterday endorsed a bipartisan plan from the so-called “Gang of Six” senators to cut the budget deficit by $3.7 trillion over 10 years through a combination of spending cuts and tax increases. While House Republican leaders indicated a willingness to consider the proposal, they and other members of their caucus stress their opposition to a debt compromise that includes more taxes.

“How you have people who want on the one hand to say that banks need to hold less capital and then on the other hand say that the country maybe should call into question the possibility of paying its debts, and then they say they’re trying to make the economy work better, I really can’t understand that,” Summers said in the interview. “The financial terrorism threats are untenable.”

Worked for Clinton

Summers, who was Treasury secretary under President Bill Clinton from 1999 to 2001, said lawmakers who threaten to send the country into default are “descending into a place that responsible political leaders should not go.”

Obama said he will renew talks at the White House this week with congressional leaders as the Democratic-led Senate and Republican House pursue divergent paths toward ending the stalemate over lifting the nation’s $14.3 trillion debt limit. If lawmakers don’t raise the ceiling by Aug. 2, the U.S. will default on some of its obligations, according to the Treasury Department.

To contact the reporter on this story: Jillian Berman in Washington at jberman13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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