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Summers says financial rescues were 'necessity'

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JEANNINE AVERSA | June 12, 2009 01:14 PM EST | AP

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WASHINGTON — President Barack Obama's economic adviser on Friday defended the administration's efforts to rescue banks, insurance companies and car makers, saying the actions were taken out of "necessity, not choice."

Lawrence Summers' remarks come after government bailouts of insurance giant American International Group Inc., Citigroup Inc. and other banks, General Motors Corp. and Chrysler LLC have put billions of taxpayer dollars at risk, and in some cases provoked public outrage.

In a speech to the Council on Foreign Relations in New York, Summers said the government has intervened to avoid further damage to the economy and financial markets.

"We act only when necessary to avert unacceptable _ and in some cases dire _ outcomes," the director of the White House National Economic Council said. The president "did not run ... to manage banks, insurance companies or car manufacturers. The actions we take are those of necessity, not choice."

The focus is to ensure that such intervention is temporary, based on market principles and "minimally intrusive," Summers said.

On the economy, Summers used slowing job losses and rising consumer and business sentiment to suggest that the worst of the recession has passed.

"While we still have a long way to go, the sense of free-fall that surrounded any reading of economic statistics a few months ago is no longer present," he said.

While crediting the president's stimulus package of increased government spending and tax cuts for contributing to the economic improvements, Summers warned that policymakers can't be complacent.

"There have already been several false dawns during this crisis," he said.

Summers made a pitch for revamping the nation's regulatory structure to better guard against future financial crises. Reiterating the administration's stated plan, he called for a regulator to police big, globally interconnected financial companies whose failure would endanger the economy and a system to safely wind down such firms on the verge of collapse.