At Harvard summit, most back US move

In his keynote address, Lawrence Summers warned of a backlash against globalization. (Pat Greenhouse/Globe Staff)

Captains of commerce converging on Harvard Business School for its Centennial Global Business Summit said they support a plan for the United States and other governments to stem the worldwide credit crisis by pumping hundreds of billions of dollars into financial institutions in exchange for ownership stakes.

"It's a better idea than just buying assets," Orit Gadiesh, chairman of Bain & Co., the Boston-based management consulting firm, said in an interview yesterday. "We don't have many options."

Jamie Dimon, chief executive of JPMorgan Chase & Co., one of the US banks that will get a cash infusion under the plan, also said he backs a coordinated effort. "They're clearly doing something, and hopefully this will help," Dimon said.

"In the last several days, the essential elements of a response plan are coming into play," said Lawrence H. Summers, the former US treasury secretary and Harvard University president, citing the cash injections and other moves to assure credit flow and ease lending. "These are welcome and important steps that remind us of a crucial role of government as a guarantor of macroeconomic stability."

As the economic crisis mushroomed, federal officials at first were reluctant to put capital directly into struggling banks, focusing instead on purchasing risky assets that made banks too nervous to lend to one another. But after world stock markets plunged in response to the initial bailout plan, they quickly followed the lead of British Prime Minister Gordon Brown and other foreign leaders preparing to capitalize banks.

"This is more in the line of what the Europeans are doing," Gadiesh said, applauding US regulators for recognizing a potentially workable approach. "I give them credit for coming around."

With anxiety running high about the financial turmoil spilling into the broader economy, the unfettered-market ideology that animates Harvard-educated business leaders has been muted this week at an event dedicated to redefining leadership for a new century. More than 1,500 alumni of Harvard Business School attended the summit.

"I've been a Republican all my life," Jeffrey R. Immelt, chief executive of General Electric Co., said on a panel Monday. "I believe in free markets. But the notion that the government isn't a catalyst for change in this country is purely garbage."

Some dissenting voices warned that government ownership of banks historically dampened economic growth in other countries. "It's frightening for us to hear about the US nationalizing banks," said Anand G. Mahindra, managing director of Mahindra & Mahindra Ltd., an Indian-based federation of almost 100 companies. "That's what Indira Gandhi did in 1966."

Daniel Vasella, chief executive of the Swiss drug giant Novartis AG, which has a major research operation in Cambridge, fretted that the financial rescue package could put the US government deeper in debt, which could hurt the country's economic recovery. He warned that the government outlays are "not sustainable" in the long run.

"The question one should legitimately ask is: How do you want your citizens to be prudent in taking on debt and managing their budgets if you don't do it as a government?" Vasella said in an interview yesterday. "If you look at credit card debt, we still have many people who owe more than they have, and that is not sound."

Yesterday, discussion during the business summit's final day centered on leadership in the 21st century and the future of market capitalism, though during and after sessions participants talked about federal efforts to quell the financial turbulence and their own efforts to blunt its impact on their companies.

Addressing the fallout has become a priority for General Motors Corp., said its chief executive, G. Richard Wagoner Jr. "Your big ideas of three months ago need to be put in the icebox," Wagoner told an audience. He declined to discuss reports that his company has been negotiating a potential merger with Chrysler Corp.

Summers said in a keynote address that the new challenges for leaders include maintaining stability and building a global system that works for all countries. Among other suggestions, he said new regulations are needed to make sure the failure of one financial institution doesn't endanger others. Summers also warned of a backlash against globalization unless its benefits are widely shared.

"We all need to recognize, and I think I don't speak presumptuously when I say that Harvard Business School and its alumni are seen as part of a global elite," Summers said, "we are living in a period of abnormally high disillusion with global elites."

Globe staff writer Todd Wallack contributed to this report. Robert Weisman can be reached at weisman@globe.com.