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Lawrence Summers expressed his concerns over U.S. President-elect Donald Trump’s policy proposals. Summers is the former U.S. Treasury Secretary under President Bill Clinton and former Chief Economic Advisor to President Barack Obama. He said that the proposals for deregulation were setting a financial crisis in motion. He continued by saying that deregulation in the financial sector is a serious matter and could have adverse effects. Summers stated that such measures would lead to predatory lending and over-levered banks.
The country passed the Dodd-Frank Act after the 2009 global financial crisis. Trump’s administration has vowed to dismantle it. However, Trump has not yet decided on what measure to pursue once he is in power. During his campaigns, Trump stated that he would increase restrictions on banks operating in the country. However, he also said that he would return the separation between securities underwriting and bank lending.
Summers also criticized Trump’s protectionist policies. He stated that the policies were already causing adverse effects on the American economy through the loss of value of the Mexican peso. Therefore, Mexican companies had an advantage over their U.S. competitors. He continued by saying that the policies have lead to an increase in oil prices in Mexico.
Summers explained the effect of Trump’s proposal. He gave an instance where a company was deciding whether to set up its operations in Ohio or Mexico. He continued by saying that the company would quickly choose Mexico because it is 20 percent cheaper. Since Election Day last year, the peso has lost 14 percent against the dollar.
Trump promised to levy high taxes on companies that were planning to set up factories in Mexico to supply to the American market like and General Motors Company. Summers proposed that spending should be directed to infrastructure.