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Simon Johnson's Third Way on the Fed

Instead of axing Bernanke or pretending he bears no guilt, Johnsons thinks the Fed should apologize.

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Simon Johnson, MIT professor and former IMF chief economist, has been hitting home runs on the financial crisis for months. Coming from relative obscurity, he's been approvingly quoted by David Brooks, published to great acclaim here at The Atlantic, and become known as a must-read at the economic analysis blog he co-writes, Baseline Scenario.

Today, Johnson reminds us why he's won such recognition with a provocative opinion that cuts between the "reappoint-Bernanke" consensus (covered by us here), and the smaller crowd of commentators who think the Fed chief should be guillotined for watching the housing bubble balloon in 2006.

Johnson's solution? Make the Fed apologize for its mistakes, just as Bernanke did for the institution's failure to respond effectively to the crisis in 1929:

Our top monetary policy makers completely missed the true nature of the Great Bubble and its consequences, until it was far too late. They should apologize for that and we can start work on redesigning the institution, its decision-making, and how financial markets operate, to make sure it won't happen again.

Hopefully, this time the Fed's apology won't take 70 years.

Generally speaking, Johnson falls squarely on the side of firm critics of Washington. In April, he and James Kwak penned an op-ed pointing out the "radicalization" of Bernanke's monetary policy, concluding then:

Only time will determine whether he is being brave in averting a larger crisis, or reckless in unleashing inflation that could increase quickly and uncontrollably.

His opinion deserves special recognition today for harmonizing the view that Bernanke should be punished for abetting the crisis with the idea--articulated in the Washington Post today by Steven Pearlstein--that despite his flaws, Bernanke has earned reappointment for his apparent success at keeping depression at bay.

This article is from the archive of our partner The Wire.