Business, Finance & Economics

Why a Greek Departure from the Eurozone Might Damage Dollar

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Simon Johnson, former chief economist IMF. (Photo: Courtesy of MIT Sloan School of Management)

A Greek departure from the eurozone will have major repercussions for the dollar, and US officials are doing little to shield Americans from the potential damage, economists says.

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This story is based on a radio interview. Listen to the full interview.

Simon Johnson is a professor at the Massachusetts Institute of Technology's Sloan School of Management. He tells host Marco Werman that US policymakers and bankers must move quickly to protect American investors from the impact of a possible Greek default.

"The extent of official negligence on this issue cannot be overstated," Simon tells host Marco Werman. "Unfortunately policymakers in the White House, on Capitol Hill — and I would emphasize particularly the New York Federal Reserve Bank — have buried their heads in the sand. They do not even want to talk about these issues seriously."

Simon says big US banks must build up their equity, and "firewall off" as much of the US financial system as possible. He says banks should implement an emergency suspension of dividends, and use the savings to increase their capital.