By Simon Johnson.  My written testimony to House Financial Services, Subcommittee on Financial Institutions and Consumer Credit is here.

With unemployment back up to 9.2 percent, in the numbers that came out last week, the hunt is on for an explanation of why job creation has been so slow since the financial crisis of 2008.  Some House Republicans think they have found a specific culprit: bank examiners.

In the view of Representative Bill Posey (R.) and a number of his colleagues on the House Financial Services Committee, bank examiners are clamping down on otherwise perfectly healthy banks – and forcing them to inappropriately classify some loans as “nonaccrual” (meaning less likely to be paid back).  Mr. Posey has therefore introduced a bill that would direct examiners to regard all loans as accrual, as long as payments are still being made – and a hearing was held last Friday to discuss the merits of the matter.

I testified at the hearing and was not supportive of Mr. Posey’s legislation.  On the subsequent panel of witnesses, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) testified – as the relevant regulators – and they were even more forcefully against the proposal. Continue reading “Should We Blame Bank Examiners For Slow Job Growth?” →