The Senate Budget Committee held a hearing today on the Eurozone crisis, with academic witnesses forecasting bleak economic conditions in the region for the short- and medium- term. Chairman Conrad (D-ND) probed witnesses on Basel III and money market funds (see reports in the MMF series), with Simon Johnson of MIT acknowledging the uneven implementation of Basel III and suggesting MMFs would be guaranteed by the U.S. government in another crisis. Dr. Johnson also recommended the suspension of dividends at U.S. banks in order to insulate the U.S. financial system from the Eurozone crisis and bolster capital levels, while Fred Bergsten of the Peterson Institute for International Economics proposed that the IMF seek contributions from surplus countries such as China and Brazil. Unlike recent hearings on the Eurozone crisis (see Client Reports SYSTEMIC52 & 53), Republicans did not probe witnesses on whether U.S. commitments to the IMF could lead to a “back door bailout” of European institutions. This report analyzes today’s session.

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