Lawrence Summers: 'A Long Way From The 1970s'.(The Last Word)(Interview)

Byline: Adam B. Kushner

Lawrence Summers, the former Treasury Secretary, is as well credentialed as anyone to assess the global credit crisis. He won the John Bates Clark award for best economist under 40, was chief economist at the World Bank and ran Harvard University. But that almost certainly didn't stop a gasp of relief that he hadn't been in office to witness a financial crisis like this one. NEWSWEEK's Adam B. Kushner chatted with him by telephone about the prospects for recession, and for a new era of tighter regulation. Excerpts:

Kushner: Long recession, short recession or no recession?

Summers: IT'S likely we're in a recession and that it will last less than a year, but that is some considerable distance from a certainty. The strains on the financial system associated with lack of capital make it more likely, based on historical parallels, that the recession will be protracted.

Protracted sounds like more than a year.

Many recessions occur because the Fed puts its foot on the brakes. In those, one can assume that when the Fed takes its foot off the brakes the recession will abate. Here, when the recession is generated from within the economy by the collapse of asset prices, it's much more difficult to gauge the length of the recession. No one in 1990 or '91 could have imagined how long Japan's economic problems would persist. The United States will not follow the same pattern, but even our experience in the early '90s suggests that when you have troubled financial institutions, recovery can be delayed.

How well have Fed chairman Ben Bernanke and Treasury Secretary Henry Paulson handled the crisis?