Simon Johnson recently shared his opinions on how to handle the ongoing financial crisis.
On Bloomberg on the Economy, Johnson discusses the issue of large insolvent banks (listen to the MP3 file). He's got several ideas on how to move forward. Although he acknowledges there are problems with some of the proposals, he asks how they compare to 'the alternative'.
One solution: nationalize the insolvent banks. In effect, this is what happens when the FDIC takes over failed banks, which we saw plenty of last year. The Feds take away the bank's charter, take control, and sell it off to somebody stronger. At least, we hope the buyer is stronger...
He also likes the bad bank idea, noting that the strategy worked well in Sweden so there's no need to reinvent the wheel.
Finally, he likes the idea of mortgage modification as a way to stop foreclosures. By keeping people in their homes, the banking crisis and real estate markets should stabilize.Comments
No comments yet. Leave a Comment