The U.S. should lead the global regulation of financial markets, White House Director of the National Economic Council Lawrence Summers said Friday.

In the meantime, he said U.S. regulators should not be competing to oversee certain banks, and that going forward, financial institutions should be forced to have minimum capital requirements, even in the most difficult times.

Speaking to the Brookings Institution, a think-tank, Summers said the most important thing for the U.S. economy now is confidence and spending.

"What we need today is more optimism and more confidence," he said.

As for spending, Summers said the huge deficit being racked up by the world's largest economy should be addressed, but that spending is necessary for now.

In the meantime, the U.S. should focus on generating profits from exports and investment, rather than borrowing from foreign nations, he said.

Looking ahead, Summers warned that if the U.S. were to face deflation and a further collapse in GDP, the amount of money it will need to borrow could surge.

He also addressed the upcoming G20 meeting in London on April 2, noting that President Barack Obama will address the need to support emerging market nations.

He said most countries around the world have room for some measure of fiscal stimulus.

By Megan Ainscow and edited by Stephen Huebl
©CEP News Ltd. 2009