Message to Congress: Break Up The Banks

Economist Simon Johnson says it will likely be a long struggle to get the financial system functioning as it should so that it no longer can behave in ways that endanger the entire national and global economy. A key event in that struggle takes place in Capitol Hill on June 11, when he and other progressive financial industry experts speak at a forum billed as "community people pushing policy people" on the subject of re-regulating the financial services industry.

The event is part of A New Way Forward [1], a nationwide mobilization effort that declares that "it is time to break up the banks." More specifically, the series of rallies, forums and town hall meetings that began this week is promoting a three-pronged agenda of nationalizing, reorganizing and decentralizing banks and other financial institutions.

Johnson, a professor at MIT's Sloan School of Management and a senior fellow at the Peterson Institute for International Economics, says in this interview that banks should be treated like nuclear power plants, "tightly regulated" to protect consumers and the economic system as a whole. "You don't want excessive or even a high level of risk in the core of that sector," he says. "It's way too dangerous."

Johnson, one of the contributors to the economics blog Baseline Scenario [2], also says that he sees troubling signs in news that the Obama administration appears to be backing away from some more audacious proposals for reforming the regulatory structure under which banks operate. Johnson said administration insiders are torn between aggressive reformers such as Sheila Bair, the outspoken director of the Federal Deposit Insurance Corporation, and status quo defenders such as Treasury secretary Timothy Geithner. "Part of what we're trying to do in our public discussion is side with the Sheila Bair line of argument, and try to strengthen their position."

The Capitol Hill event [3] begins 9 a.m. June 11 in the Gold Room of the Rayburn House Office Building. The event is scheduled to be webcast. The Campaign for America's Future is a supporter.