Renowned Economist Simon Johnson Calls for a National Safety Board for Finance Ticking Time Bomb
The financial sector, in case you hadn't noticed, is a ticking time bomb.
Economist Simon Johnson has noticed, and rather than sitting around waiting it for it to explode in our faces again, and he has a novel idea: We should learn from accidents and mistakes and figure out how to make the system safer down the road. In a recent essay on Bloomberg, Johnson spells out how we can do this: Establish the equivalent of a National Transportation Safety Board for the financial sector,
In Johnson's view, the regulatory bodies currently overseeing the financial industry aren't cutting it. And the half-hearted tweaking of Dodd-Frank isn't likely to help much. In looking at the causes of the crisis, Johnson blames the regulators and the banks, "and the ways in which the latter captured the hearts and minds of the former (as well as politicians of both parties)."
Johnson points out that the recent JP Morgan fiasco illustrates the need to investigate how the losses occurred, and the fat chance we actually have of doing that. Jamie Dimon knows how to throw his weight around in Washington, and will do so, making any inquries coming out of that direction fairly useless. Potential investigations on the part of the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Office of the Comptroller of the Currency or the Federal Reserve would be rife with conflicts of interest. These folks, Johnson reminds us, tend to be less than enthusiastic uncovering and explaining what they should have seen coming. He sums up the need for better oversight thus:
"The point isn’t to eliminate risk from the financial sector, air travel or our lives; that is impossible and a fool’s errand. But we should better understand those risks and how to control them. When the supposedly best risk managers on Wall Street suddenly announce billions of dollars in unexpected losses, we need to know exactly what happened and why."
Johnson has had some other interesting ideas lately, too. LIke the resignation of Jamie Dimon from JP Morgan Chase. I won't be holding my breath on that one, but it's nice to see him in the hot seat.