90.9 WBUR - Boston's NPR news station
Top Stories:
PLEDGE NOW
Simon Johnson on Bernanke and a Second Crisis
MITs Simon Johnson

MIT's Simon Johnson

A new U.S. financial crisis looms, and the seeds of it are in the Federal Reserve itself. That’s the view of MIT’s Simon Johnson, former chief economist at the International Monetary Fund, who is arguing that Federal Reserve Chairman Ben Bernanke should not get a second term.

Johnson told Tom Ashbrook today that Bernanke did a good job addressing the crisis last year, but going forward he still has not tackled the “too big to fail” issue — the notion that big banks will be bailed out if their failure represents systemic risk.

A Senate committee moved forward with Bernanke’s re-nomination in December, and the full Senate is expected to consider his candidacy later in January when it comes back in session. President Obama gave him a strong endorsement.

Wall Street banks, Johnson said, remain convinced that Bernanke might help bail them out again, despite his plans to avoid such scenarios and his assurances that we are not headed in that direction. 

SIMON JOHNSON: Well, they certainly don’t believe it…The technical place to look at this is what’s called credit default swap spreads. This is where the market bets on probability of default for various kinds of financial instruments. Look at what these credit default swap spreads tell you the market believes after the Bernanke [December Senate committee] testimony about what will happen to Bank of America or Citigroup or any of the other big, troubled financial institutions. The market is very clearly saying that they think there is going to be another bailout, more bailouts, unlimited bailouts, as necessary. And those expectations of course are self-fulfilling. If people believe that, they will put money in, they will lend money to these massive institutions. They will get bigger. They will become even more dangerous. They will behave in a reckless fashion. This has to stop. And the Federal Reserve is not addressing this.

Political observers say Bernanke will likely be re-confirmed, but “no” votes from both the political left and right might mean the final tally will reflect more opposition than that of previous Fed chairs.

Johnson said a good candidate to replace Bernanke would be Thomas Hoenig, president of the Federal Reserve Bank of Kansas City.

You can listen to Johnson’s remarks on Bernanke (the clip includes some audio from Bernanke’s recent address to the American Economic Association meeting in Atlanta):

You can listen here to our full interview with Johnson on today’s show.

Please follow our community rules when engaging in comment discussion on this site.
ONPOINT
TODAY
Oct 23, 2014
Specialist Ronnie Howard, center, calls out prices as he works at his post on the floor of the New York Stock Exchange Thursday, Oct. 16, 2014. Beyond the turmoil shaking financial markets, the U.S. economy remains sturdier than many seem to fear. (AP)

The global economic wobble. Europe weakness. China fears. Wild markets. We’ll lay out the global economy now.

Oct 23, 2014
A screenshot from the interactive game, "Depression Quest," the game at the root of the ongoing #GamerGate controversy. (Courtesy  "Depression Quest")

#GamerGate. Sexism, misogyny and rough stuff in a video game world culture clash.

RECENT
SHOWS
Oct 22, 2014
Authors Nicholas Kristof and wife Sheryl WuDunn attend the premiere of "Meena" at the AMC Loews Theater on Thursday, June 26, 2014 in New York.

Author and New York Times columnist Nicholas Kristof says regular folks like us can change the world. He explains how. Plus: we remember the late, great Washington Post editor, Ben Bradlee.

 
Oct 22, 2014
Health workers carry the body of a woman suspected of contracting the Ebola virus in Bomi county situated on the outskirts of Monrovia, Liberia, Monday, Oct. 20, 2014. (AP)

We’ll go to Liberia, and hear from a pastor and a physician at the epicenter of the Ebola crisis.

On Point Blog
On Point Blog
Introducing The Explicast: A New Podcast From On Point Radio
Friday, Oct 17, 2014

Confused about the news? Don’t worry: so are we sometimes! Introducing a new On Point Radio podcast: The Explicast. You can find Episode One right here.

More »
1 Comment
 
Two LIVE Tracks From Jazz Violinist Regina Carter
Friday, Oct 17, 2014

Regina Carter shares two live tracks — one arrangement, and one original composition — with Tom Ashbrook in the On Point studio.

More »
Comment
 
Our Week In The Web: October 17, 2014
Friday, Oct 17, 2014

We talk Facebook mishaps, whether Katy Perry was actually right and the glory of architectural giants and their iconic windows.

More »
Comment