Newsmaker Interview: Through Another Lens

A conversation with Simon Johnson, an ICBA ally in ending too-big-to-fail

 From January 6, 2014

Who better to explain the true impact of the still-growing too-big-to-fail problem on the national economy and community banking than Simon Johnson, professor of entrepreneurship at the MIT Sloan School of Management and senior fellow at the Peterson Institute for International Economics in Washington, D.C.? Having forcefully argued the position that too-big-to-fail banks must be broken up if we want to avoid future financial catastrophe, Johnson is both a supporter and friend to ICBA and community banking issues.

Echoing ICBA’s policy views and actions, Johnson continues to explain, persuasively and persistently, to policymakers in Washington how the additional orderly liquidation authority the Dodd-Frank Wall Street Reform Act provides the FDIC to wind down the largest financial institutions should they fail during another crisis doesn’t address the underlying serious problem of too-big-to-fail. As evidenced by Wall Street’s megabanks growing even larger since the financial crisis, he says, finally ending too-big-to-fail will require specific policy action to significantly break up and downsize the very largest nationwide megabanks and financial conglomerates.

In fact, he adds, our nation’s banking system and economy are even more vulnerable to another financial catastrophe because of too-big-to-fail.

“Independent, unbiased expert voices like Professor Johnson’s are critical to the too-big-to-fail debate and the goal of ending too-big-to-fail,” says Karen Thomas, ICBA’s senior executive vice president, government relations and public policy. “Their independence lends credence to their point of view, and can help move policymakers in the right direction.”

“More than any other financial expert, he has demonstrated to community banks the need to be vigilant regarding the too-big-to-fail issue and to support legislation that ICBA has been advocating that would address the problem,” adds ICBA Senior Vice President and Senior Regulatory Counsel Chris Cole.

At the fall 2013 ICBA Federal Delegate Board meeting, Johnson addressed the group with his usual directness and clarity. He took a few minutes after addressing ICBA leaders to answer a few questions for ICBA Independent Banker. What follows is a condensed version of the conversation.

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