Simon Johnson, an econ professor at MIT and former IMF economist, started blogging recently at TPMCafe. And David Kurtz interviewed him in today’s episode of TPMtv. The argument Johnson makes is one that’s been tossed about in a loose aphoristic way in the public debate but seldom gets put in such blunt and concrete terms. What Johnson argues is that in economic crises in recent decades where the IMF has worked to step in and put things right, seldom if ever do things get fixed unless the political power of the group that caused the mess is somehow disrupted — in most cases the political power of the group that ran the big financial institutions.

Not that political elites are wholly displaced or overturned. But there’s got to be some fundamental break in their power to get the necessary reforms through.

A couple things occur to me about this. One is that whatever you can say about the IMF and the World Bank, the key factor behind their role as crisis-fixing and stabilizing institutions in the post-war era is that they had the power of the US behind them (and the developed countries more generally). So whatever the wisdom of their interventions, they usually had the power to dictate solutions. And that very often meant overruling political elites who either would not face problems or had vested interests in not facing them.

Now, let me stipulate that the record was by no means perfect. I know that. But for the purposes of this discussion, my point is that there was an external power that could step in in a politico-economic situation that had become dysfunctional or stuck. For the US (or probably Europe, for that matter), though, there’s no outside force.

Back to the initial point. Everyone is always saying: how can we fix the problem as long as the people we have in charge are the people who created the problem in the first place? Very true in many ways. I’ve said it a lot myself. But this point has brought it home to me in a much more concrete way. The assumptions, the vested interests, the wealth, the political power are just too much to overcome.

Here’s the interview …

The Times has a piece in tomorrow’s paper coalescing the growing number of experts who believe that many of the big banks are insolvent and that — whatever you want to call it — the government is going to have to step in and really resolve the crisis, through some process of seizing the failed banks, cleaning them up and selling them back into private hands.

It’s a difficult process to chart. But the public mind seems slowly to be shifting in this direction.

The article quotes Simon Johnson and Adam Posen, both of whom we’ve interviewed in recent days on TPMtv. Click the links to see the interviews.

Has anyone else read this book? Many of you must have. Only Yesterday by Frederick L. Allen. The classic first-draft history of the 1920s prosperity up to the 1929 crash, written from the vantage point of 1931.

Gibbs on Gregg:

“We regret that he has had a change of heart.” Gibbs said that Gregg had sought the job, promising to support Obama’s agenda, and that once it became clear that wasn’t possible, “it became necessary for Senator Gregg and the Obama administration to part ways.”

From Bloomberg …

Stanford Group Co., a Houston-based investment firm led by billionaire R. Allen Stanford, is under investigation by U.S. securities regulators over sales of certificates of deposit in its affiliated offshore bank and the consistent, above-average returns those investments pay

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Why not former FCC Chair Reed Hundt for Commerce Secretary? He’s got the chops on all the key Commerce

Department issues: trade, Census, broadband, stimulus. He’s got better politics than anyone else you’re going to get for the job. And he was part of the transition team. Also, not to be overlooked: he’s a Democrat, so he might actually pursue sensible policies.

Late Update: Jon Taplin says it should be Eric Schmidt of Google. But having the head of Google get access to all the Commerce Dept. data and then make a widget out of it. Don’t know about that.

Best joke about Gregg withdrawal? (There have to be so many.) Send me your entries.

(ed.note: I’m tempted to suggest that Gregg was reviewing his records in preparation for his confirmation hearings and discovered that he’s a conservative Republican and Obama’s a Democrat, etc. and felt compelled to withdraw. But I admit you need a bit more poetry to make the whole thing sing.)

Late Update: Further possible joke fodder: Gregg says he notified the White House of his decision “earlier this week.”

Norm’s legal team finally sees the futility of arguing for the counting of absentee ballots obtained via forgery.

Meanwhile, Eric Kleefeld notes that the legal arguments both sides are making don’t match up with their party affiliations. Right is left and left is right.