Johnson explains to Bill Moyers on the JOURNAL that the U.S. financial system reminds him more of the embattled emerging markets he encountered in his time with the International Monetary Fund than that of a developed nation. As such, Johnson believes that the U.S. financial system needs a "reboot," breaking up the biggest banks, in some cases firing management and wiping out shareholder value. Johnson tells Bill Moyers that such a move wouldn't be popular with the powerful banking lobby: "I think it's quite straightforward, in technical or economic terms. At the same time I recognize it's very hard politically."

Without drastic action, Johnson argues, taxpayers are merely subsidizing a wealthy powerful industry without forcing necessary systemic changes: "Taxpayer money is ensuring their bonuses. We're making sure that banks survive. And eventually, of course, the economy will turn around. Things will get better. The banks will be worth a lot of money. And they will cash out. And we will be paying higher taxes, we and our children, will be paying higher taxes so those people could have those bonuses. That's not fair. It's not acceptable. It's not even good economics."

Johnson expands these arguments on his blog, THE BASELINE SCENARIO:

"[W]eakening the big banks and their bosses should not be seen as an unfortunate side effect of beneficial medicine. It is exactly what we need to do under these circumstances. Unless and until these banks' economic and political influence declines, we are stuck with too many people who know exactly what they can get away with because their organizations are "too big to fail."

And weakening these banks (or actually having some of them go out of business and be broken up) as part of a comprehensive system reboot - with asset revaluations at market prices and a complete recapitalization program - will help return the credit system to normal.

“The situation we find ourselves in at this moment, this week, is very strongly reminiscent of the situations we've seen many times in other places. But they're places we don't like to think of ourselves as being similar to. They're emerging markets. It's Russia or Indonesia or a Thailand type situation, or Korea... I have this feeling in my stomach that I felt in much poorer countries, countries that were headed into a really difficult economic situation, when there’s a small group of people who got you into a disaster, who were still powerful, and disaster made them more powerful... Don’t get me wrong – these are fine upstanding citizens who have a certain perspective and a certain kind of interest, and they see the world a certain way... That web of interest is not my interest or your interest or the interest of the taxpayer. It’s the interest, first and foremost, of the financial industry in this country.”