Now, let's look at what Summers did to see if Ferguson's allegations about Summers are justified.
A Greater Deregulator Than Reagan
Summers championed the ultimate deregulation achievement that even Reagan could not. He advised Clinton to repeal Glass-Steagall, a regulation put in place to limit the causes of the Great Depression and that had produced economic prosperity with economic equality since 1933.
Prior to 1929, investment arms of banks had owned hedge funds that had been wildly speculating in risky investments in the stock market. Then, because banks could do both functions, the creditors of the investment bank division could seize the savings of America in the deposit money at the commercial bank division if their speculations went south, as they did.
But commercial banks were doing the same risky speculation in the markets. So, Glass-Steagall separated the function so that no one entity could be both investment and commercial bank. Now if investment banks lost their bets, the creditors could not seize deposit money.
It also limited the commercial banks so that they could only speculate in the markets to the extent of 10% of their assets. After the Summer's supported policy of repealing Glass Steagall was put into effect, the reins were off. The executives at both banks could use bank assets to speculate in the markets for profits that flowed into their bonuses putting depositor money at risk.
Now, bank executive bonuses exploded.
Worth noting: banks are not required to keep deposit money in trust for the owners, but can use that money as they wish, including playing the stock market.
Summers defends his policy to this day claiming that the Canadian banks were allowed to merge, and they did not need a bailout. That is disingenuous, for as Summers must know, if he knows anything about the financial system, Canada kept the assets of the two types of banks separate so that the creditors of the investment banks could not seize the deposit money at the commercial banks. It also did not permit banks to own insurance companies the way that Citibank had purchased Travelers heralding the demise of Glass Steagall. So, big, big differences.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).