Per Ezra Klein, we learn that Larry Summers has said this:
As for [Milton] Friedman -- I'm not so sure he looks bad. What is most screwed up today? GSEs, Citibank, regional banks. What is most regulated? Same list. What is least screwed up? Hedge funds and the like. What is least regulated? If regulation means the jihad against short selling that the Securities and Exchange Commission is engaged in, then god help us all.
The only reason "regulated" banks are the "most screwed up" now is because the "unregulated" investment banks are "gone." And as for hedge funds:
The hedge fund industry has been hit hard by the worst global financial and economic crisis in decades.
...[A]ssets under management in the global hedge fund industry declined to $1.56 trillion at the end of October, a level last seen at the end of the fourth quarter of 2006.
"There are a lot managers that are going out of business that have underlying positions that are profitable" because they can't get the financing as a result of the credit crisis, Webster said.
This is the man who has Obama's ear on economic policy.