* Obama economic adviser sees positive US economic signs
* Summers says 'sense of unremitting freefall' has ended
* Treasury's Geithner says US to sustain economic support
By Donna Smith and Will Dunham
WASHINGTON, April 26 The sense of "unremitting
freefall" in the U.S. economy has ended and the picture is no
longer completely negative, but rather mixed, President Barack
Obama's economic adviser Lawrence Summers said on Sunday.
Speaking on the "Fox News Sunday" program, Summers also
said the "vast majority" of U.S. banks are well capitalized and
expressed hope that the auto negotiations between Chrysler and
Italian carmaker Fiat SpA FIA.MI would work out.
"Six or eight weeks ago, there were no positive statistics
to be found anywhere. The economy felt like it was falling
vertically. Today, the picture is much more mixed," Summers
"There are some negative indicators, to be sure. There are
also some positive indicators. And no one knows what the next
turn will be," he said. "But I think that sense of unremitting
freefall that we had a month or two ago is not present today.
And that's something we can take some encouragement from."
The U.S. economy, now in its 16th month of recession,
shrank at a 6.3 percent annual rate in the fourth quarter of
2008, the steepest quarterly plunge in more than 26 years.
Economists expect a report on Wednesday to show it slipped a
further 5 percent in the first three months of this year.
Still, steep drops in consumer spending and home sales
appear to easing, raising hope the worst may be over.
The Group of Seven industrial powers reached the same
conclusion about the global economy at a meeting on Friday. But
U.S. Treasury Secretary Timothy Geithner cautioned that an
easing in the downturn should not be confused with recovery.
On Sunday, he told world development ministers meeting in
Washington that the United States was not going to let up in
its efforts to spur growth. "The United States will sustain
action as long as necessary to see growth resume, not just
nationally but globally," he said. [ID:N26488498]
LONG WAY TO GO
In his television appearance, Summers also sounded cautious
about the U.S. economy. "We've got a long way to go. There are
still serious problems in this economy," he said.
"But ... the measures we've taken are, I think, very strong
(and) offer the prospect of containing a very serious
situation," he said.
Working with Congress, the Obama administration has put in
place a $787 billion package of tax cuts and government
spending to spur growth. In addition, the Federal Reserve has
cut interest rates to near zero and pumped money into
distressed credit markets to try to free up lending.
Summers said that while the United States had laid the
groundwork for a recovery, he expected to see sharp declines in
employment for quite some time. History shows it takes some
time, six months or more, for a stimulus program to work its
way through the economy and job creation to begin, he said.
"I suspect the economy will continue to decline for some
time to come," Summers said. But he noted that the consensus
among forecasters suggests the economy will perform better by
the end of the year.
GOV'T IN POSITION TO SUPPORT BANKS
Summers added that the "vast majority" of U.S. banks are
well capitalized but said further steps to shore up the
financial system are needed.
"It can be done in many ways, by raising private capital
through exchanges, back-stopped by government capital where
necessary. But I think we're going to be in a good position to
provide the support and set the framework in which the banking
system can move along the process of recovery," Summers said.
U.S. regulators on Friday outlined how they "stress tested"
the health of the country's top 19 banks, and said banks would
need to hold substantially more capital than usually required
to guard against the risk of a more severe economic downturn.
Regarding the Chrysler-Fiat negotiations, Summers said are
issues have been worked out and some remain.
"But it's in everybody's interest, we believe, to see these
negotiations succeed. And we're hopeful that they will. It's
obviously a situation that we're monitoring carefully," Summers
Chrysler faces a Thursday deadline by the Obama
administration to reach cost-cutting deals and cement an
alliance with Fiat. If the automaker fails to do that, the U.S.
government could withhold further loans and the company may
(Additional reporting by Glenn Somerville, editing by Philip