Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. He is a co-founder of BaselineScenario.com and a member of the FDIC’s Systemic Resolution Advisory Committee. In 2014, he joined the Financial Research Advisory Committee of the U.S. Treasury’s Office of Financial Research, and from 2009 to 2015, he was a member of the Congressional Budget Office's Panel of Economic Advisers. Johnson has published more than 300 high-impact articles in leading news platforms and is the co-author of several books, including White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You
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Johnson and Calomiris debate whether to break up big banksprobably the biggest open question remaining since the financial crisis.
At a stroke, the proposed law would force global megabanks such as JPMorgan Chase and Bank of America to become smaller and much simpler -- divorcing high risk activities from plain-vanilla traditional banking.
The dangers of reckless behavior by global megabanks are now understood much more broadly. And Brown-Vitter provides an appropriate road map for addressing some of the core problems and making the financial system significantly safer.
Johnson discusses financial reform, Too Big to Fail, and Americas huge national debt.
The true conservative agenda should be to take government out of banking by making all financial institutions small enough and simple enough to fail.
Too-big-to-fail banks should be made smaller, and preferably small enough to fail without causing global panic.
With unemployment obstinately high and fiscal policy on ice, the Federal Reserve will continue to push down long-term interest rates. Further rounds of quantitative easing will tend to weaken the dollar. This is a much more effective way to move our currency than any foreign-exchange market intervention.
Clearly, the Fed chairman recognizes the severity of the problem and has decided to do whatever it takes to prevent anything like the Great Depression from happening again. Given where we are today, that means printing money, even if that runs the risk of creating a serious inflation problem.
In our view, the Feds current print the money strategy (and, yes, I know the Fed doesnt like this term or even quantitative easing) is make-or-break for turning the economic corner any time soon. Its incredibly risky in terms of potential inflation more than the Fed would ever concede but preferable to all the available alternatives.