STEPHEN DUBNER: Now there are some people who would argue that the financial crisis itself was a product, in some part, based on decisions that you and others had made in a previous Democratic administration — the Clinton Administration; specifically as part of the Financial Services Modernization Act, the repeal of Glass-Steagall, which freed up banks to be more aggressive. Also, you argued quite heavily against the regulation of derivatives, the financial instruments which, of course, turned out to be quite dangerous. Looking back, same question: what do you think you might have done differently if you knew then what you know.

LARRY SUMMERS: With the benefit of hindsight and if you wave away all the political problems that would have existed at that time, it surely would have been much better to have put in place all the kinds of safeguards that were contained in the Dodd-Frank legislation that was passed in 2010, to have anticipated all of those needs, and to have put them in place during the 1990s. I think that, in assessing the actions that were taken in the 1990s, there are a number of things that are useful to keep in mind.

With respect to Glass-Steagall, there’s nothing in the crisis that had to do with the combination of commercial banking and investment banking, which is what Glass-Steagall was all about. You think about the main institutions that were involved: Lehman Brothers had nothing to do with commercial banking, Bear Stearns had nothing to do with commercial banking, Fannie and Freddie had nothing to do with either, A.I.G. was an insurance company, and I could go on with the list. In fact, some of the key measures that resolved the crisis, such as J.P. Morgan’s taking over of Bear Stearns or Bank of America’s taking over of Merrill Lynch, involved the combination of commercial banking and investment banking. So I don’t find it plausible that Glass-Steagall reform had anything to do with causing the crisis. I think it’s a mistake that economists should be able to move beyond — to simply phrase these questions as “all regulation is good and all deregulation is bad.” 

I think the question of derivatives is a much more complicated story. Our desire was not to keep derivatives deregulated. We ran into a problem, which was that statements that had been made by the C.F.T.C. called into question whether the enforcement of all the huge trillions of dollars of derivatives contracts out there would be possible. Because of the way they’d made the statements, they seem to be questioning the enforceability of those contracts. Under those circumstances, there was huge pressure from Congress to provide legal certainty. It was a Republican — very much a free-market — Congress and they insisted, as part of providing legal certainty, that there be some removal of certain regulatory issues with respect to derivatives.

Should we have gone along with that? Perhaps, given what happened, you can say it was a mistake. I worry that it may have been a mistake. On the other hand, there were issues that seemed pressing to the experienced attorneys at the S.E.C., the Treasury, and the Fed about legal certainty to which we were responding. If we had preserved authority, I don’t think very much would have happened because while we did sign legislation that reduced regulatory authority, the Bush administration, which was the administration in power from 2000 until the crisis hit, used only a small fraction of the regulatory authorities that it had. It, in fact, ran major photo-ops where they showed all the regulatory officials taking the saws you use to cut wood to books of regulations. It’s hard to believe that whatever authority had been preserved would have been used by the officials who were staging book burnings of regulatory books.

I’m not completely objective on it. Again, I would wish more than anything that we had had the foresight and the political strength to put in place — irrevocably — the kind of protections that were put in place in 2010 with Dodd-Frank. But I think that the narrative is, at least, much more complicated than that of many who simply say, “They were for deregulation and then we had a crisis, so it must have been a mistake.” ...