(2009-04-02) Johnson Imf Us Oligarchy

Simon Johnson (ex-IMF) on the Credit Crisis 2008 as classic Banana Republic Oligarchy Bail-Out outcome. Some of these deals may have been reasonable responses to the immediate situation. But it was never clear (and still isn't) what combination of interests was being served, and how. Treasury and the Fed did not act according to any publicly articulated principles, but just worked out a transaction and claimed it was the best that could be done under the circumstances. This was late-night, backroom dealing, pure and simple. Rather "amusing" to have the US get the IMF treatment, and to have Liberal-s suddenly support the same process that they say destroys developing economies, while "conservatives" (Wall St) will flip-flop the other direction. The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary. The IMF's advice would be, essentially: scale up the standard Federal Deposit Insurance Corporation process. An FDIC "intervention" is basically a government-managed bankruptcy procedure for banks. It would allow the government to wipe out bank shareholders, replace failed management, clean up the balance sheets, and then sell the banks back to the private sector... Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business (Glass Steagall)... Regulation and taxation should be part of the solution. Over time, though, the largest part may involve more transparency and competition.