Obama adviser touts case for stocks

Current stock prices may represent “the sale of the century,” President Obama’s top economic adviser said Friday as markets shook off a warning shot from China to complete their best week since the new U.S. administration took office.

The Dow Jones Industrial Average rose almost 54 points Friday, ending the week at 7,223.98, a rise of nearly 600 points from Monday’s opening-bell figure. It represented the first sustained stock rally since Mr. Obama’s Jan. 20 inauguration, giving him a respite from questions about whether Wall Street is reacting badly to his economic agenda.

Still, Lawrence H. Summers, chairman of the White House National Economic Council, said most investors remain seized by excessive fear about the market and he encouraged them to see opportunities for profit in a stock market still 50 percent below its high of 14,000 points in July 2007.

“That the market would be at essentially the same real level as it was in 1966 … will be regarded by some as suggesting the presence of the sale of the century,” Mr. Summers said in a major speech at the Brookings Institution.

“While greed is no virtue, entrepreneurship and the search for opportunity is what we need today,” Mr. Summers said. “There are a very large number of things that are on sale today. … My advice to business leaders would be not to foreshorten the horizon on a moment like this.”

Though he said “it is surely too early” to judge the impact of the White House plan, he added that a rise in consumer spending last month is “modestly encouraging.”

However, in Beijing, a top Chinese official voiced anxiety about the growing level of U.S. debt and what effect that might have on the safety of U.S. bonds and treasuries, in which China is heavily invested.

“We have lent a huge amount of money to the U.S., so of course we are concerned about the safety of our assets. Frankly speaking, I do have some worries,” said Chinese Prime Minister Wen Jiabao, the second-ranking Chinese government official behind President Hu Jintao.

Beijing holds more than $1 trillion in U.S. debt, and Mr. Wen was only the latest to express hope that the U.S. economy corrects so that America remains capable of honoring its commitments.

White House press secretary Robert Gibbs talked up the value of U.S. securities from the podium of the Brady Press Briefing Room.

“There’s no safer investment in the world than in the United States,” he said.

But several economists said that despite the White House’s optimism, significant uncertainty remains about the future, and that is why capital is not flowing like it should.

“Significant work remains undone about crafting financial rescue and restructuring regulation. As long as investors are not sure about the financial landscape going forward, they will be reluctant to commit,” said Vincent Reinhart, a former senior official at the Federal Reserve who is now at the conservative American Enterprise Institute.

Mr. Obama and Mr. Summers also had a secondary message Friday about their efforts to stabilize the economy. They said the Obama plan to reform health care and energy is not, as some have said, trying to do too much.

“It is tempting to suppose that as some argue, the focus of economic policy at a moment like this should be solely on achieving economic recovery. We believe that that would be setting our sights too low. It would be, in a real sense, irresponsible, because we have just been reminded of the dangers of policies that produce short-term bubble-driven growth, instead of durable and sustainable growth,” he said.

Story Continues →