Fighting America's 'Financial Oligarchy'

Enlarge Stephen Jaffe/IMF / Getty Images

At a press conference in July 2008, Simon Johnson and members of the IMF predicted a global recession.

Stephen Jaffe/IMF / Getty Images

At a press conference in July 2008, Simon Johnson and members of the IMF predicted a global recession.

Former International Monetary Fund chief economist Simon Johnson has advised many countries in financial crisis. When it comes to America's current economic woes, Johnson says that U.S. suffers from "financial oligarchies" — government officials and elite members of the financial sector that run the country like a profit-seeking company.

In his article "The Quiet Coup" in the May issue of The Atlantic Monthly, Johnson explains that the close connections between government officials and financial leaders are a major part of the U.S.'s economic problems:

"We face at least two major, interrelated problems," Johnson writes. "The first is a desperately ill banking sector that threatens to choke off any incipient recovery that the fiscal stimulus might generate. The second is a political balance of power that gives the financial sector a veto over public policy, even as that sector loses popular support."

Johnson insists the U.S. must temporarily nationalize banks so the government can "wipe out bank shareholders, replace failed management, clean up the balance sheets, and then sell the banks back to the private sector." But, Johnson adds, the U.S. government is unlikely to take these steps while the financial oligarchy is still in place.

Unless the U.S. breaks up its financial oligarchy, Johnson warns that America could face a crisis that "could, in fact, be worse than the Great Depression — because the world is now so much more interconnected and because the banking sector is now so big."

Johnson was the chief economist at the International Monetary Fund during 2007 and 2008. He is a professor at MIT's Sloan School of Management.