Economist Loses a Post After TV Comments

An economist well known for his pessimistic warnings about the financial health of the banking industry said Friday that he has been ousted from a non-paying position at a Stanford research center because of controversial comments he made on ABC’s “Nightline” program.

R. Dan Brumbaugh said the decision by administrators at Stanford’s Center for Economics Policy Research stemmed from comments he made on a July 31 appearance on the program with Federal Deposit Insurance Corp. Chairman L. William Seidman.

In that appearance, Brumbaugh said that the banking deposit insurance fund is weak, and that taxpayers are at risk to pay for bank failures. His most controversial remark, which received the most attention, was that several of the nation’s largest banks are actually insolvent. Seidman, on the program, called Brumbaugh’s remarks “preposterous.”

Brumbaugh said that after the appearance, officials with the Stanford center canceled a banking project he was to head and cut off his affiliation. Brumbaugh said he believes that the center was under pressure from banking executives who contribute to Stanford, and Bush Administration officials, several of whom used to be affiliated with the center.

Edward Steinmueller, deputy director of the center, denied Brumbaugh’s allegations. He said the idea of the banking project was not pursued because members of Stanford’s faculty were not interested in it, and that the center’s role is to aid their research.

Brumbaugh, one of the first to warn about the saving and loan mess, is frequently quoted in the news media. Even though he had no official job with Stanford, he is frequently identified incorrectly as an economist or professor with the university.

Steinmueller described Brumbaugh’s title of senior research scholar as a “courtesy title” given to him. He said that Brumbaugh’s main task at the center was to organize a banking conference earlier this year.