Low Bank Capital Is Next Fiscal Crisis: Simon Johnson

From Bloomberg News

The summer debate that has dominated Washington seems straightforward. Under what conditions should the U.S. government be allowed to borrow more money? The numbers that have been bandied about focus on reducing the cumulative deficit projection over the next 10 years, as measured by the Congressional Budget Office.

But there is a serious drawback to this measure because it ignores what will probably prove to be the U.S.’s single largest fiscal problem over the next decade: The lack of adequate capital buffers at banks.

Read More »

Emerging Markets May Name Strauss-Kahn’s Heir: Simon Johnson

MIT Sloan Prof. Simon Johnson

From Bloomberg

Even before the shocking events of the past few days, the international policy community had been contemplating a successor to Dominique Strauss-Kahn at the International Monetary Fund.

Strauss-Kahn, the IMF managing director, was expected to begin campaigning soon for the presidency of France. Now, whatever happens in the New York legal system as he defends himself against attempted rape allegations, it seems likely that the IMF will be searching for a new head sooner rather than later.
The idea that the job has become an attractive sinecure with nice fringe benefits should have been laid to rest by German Chancellor Angela Merkel’s preemptive strike earlier this week, when she said there are currently “good reasons” for the European Union to have a candidate. That produced similar expressions from other leading European politicians, although not all of them are willing to say that Strauss-Kahn is finished. Yesterday, the Chinese Foreign Ministry pronounced that the selection process must emphasize “fairness, transparency and merit.” Translation: China is pushing back against the idea that Europe necessarily gets to name Strauss- Kahn’s heir.

See the full column at Bloomberg Opinion 

Listen to Simon Johnson on NPR’s  All Things Considered

Simon Johnson is Ronald A. Kurtz (1954) Professor of Entrepreneurship and Professor of Global Economics and Management

Simon Johnson talks about corruption and the rule of law

Simon Johnson recently spoke about corruption and the Rule of Law with Art Buono of Lawyers.com:

Art Buono: Simon, thanks for taking part in the Rule of Law Interviews. So, just to start, could you tell us a little bit about what’s happening with financial reform? It’s been about a year since “13 Bankers” was published. And you’re a warrior right on the front lines there. What’s going on, on the battleground? And who’s winning?

Simon Johnson: Well you know it’s obviously – it’s going to be a long haul to change the relevant rules and power structure around these issues. But I’m fairly optimistic at this point, for a couple of reasons. First of all, the academic Read More »