WILLIAM ISAAC’S PUBLISHED WORK

Bill Isaac has authored hundreds of articles in top publications and has frequently testified before Congress.

RECENT PUBLISHED WORK

columns from William Isaac in top financial publications

Address by William M. Isaac Said School of Business The University of Oxford Oxford, United Kingdom Excellence in Leadership April 28, 2017

Address by William M. Isaac Said School of Business The University of Oxford Oxford, United Kingdom Excellence in Leadership April 28, 2017

April 27, 2017

Address by William M. Isaac
Said School of Business
The University of Oxford
Oxford, United Kingdom

Excellence in Leadership

 April 28, 2017

It’s very special to be invited to speak at this important conference and to be among such a distinguished audience of business, government, academic, and student leaders at the Said School of Business at Oxford. Not very many universities can say that they “were founded so long ago no one can remember when, but we think it was around 1096,” which is what I found when I Googled the University of Oxford.

I’m pleased to see many younger leaders in the audience today. I hope you will consider public service in your lives, as the world needs devoted and selfless leadership more than ever. I believe you will find public service incredibly satisfying.  Certainly my eight years leading the FDIC were the most rewarding in my professional life.

I have been asked to share my views on how business, academic, and governmental leaders can overcome today’s incredible economic and political challenges and create long-term sustainable value. I will keep my remarks relatively brief as I want to allow plenty of time for questions and discussion.

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The Shattered Arguments for a New Glass-Steagall By William M. Isaac and Richard M. Kovacevich Published by The Wall Street Journal on April 25, 2017

The Shattered Arguments for a New Glass-Steagall By William M. Isaac and Richard M. Kovacevich Published by The Wall Street Journal on April 25, 2017

April 26, 2017

The Shattered Arguments for a New Glass-Steagall
Investment banking isn’t risky. What’s dangerous is creating stand-alone firms that can’t diversify.

Gary Cohn may not be the first White House official you’d expect to favor reinstating Glass-Steagall, the Depression-era law that split commercial banks from investment banks. Yet Mr. Cohn, the former Goldman Sachs president who now leads the National Economic Council, urged just that in a private meeting with lawmakers, according to Bloomberg News. This is deeply disappointing, particularly coming from an administration that seeks to stimulate growth by removing the government shackles that suppress competition and burden markets.

The 1999 repeal of Glass-Steagall was unfairly blamed in the aftermath of the 2008 financial crisis. Some people—apparently Mr. Cohn among them—mistakenly believe that investment banking is so risky that it should be once again kept separate from commercial banking. The truth is exactly the opposite: Traditional investment banking entails very little risk. The danger is stand-alone investment banks that are not diversified enough to survive a shock.

Here is the link to the full article

A no-brainer for Trump team: Recapitalize the GSEs William M. Isaac published by American Banker on March 28, 2017

A no-brainer for Trump team: Recapitalize the GSEs William M. Isaac published by American Banker on March 28, 2017

March 29, 2017

The Trump administration has an opportunity to break an eight-year-old logjam on mortgage finance policy and begin setting a future course for the government-sponsored enterprises, Fannie Mae and Freddie Mac.

Here’s how: Treasury Secretary Steven Mnuchin should request that Federal Housing Finance Agency Director Mel Watt suspend the GSEs’ regular payment of dividends to the Treasury, thus enabling the companies to replenish their reserve capital and putting the future of housing finance on better footing.

Here is the link to the full article

Stock Options for the Little Guy, Helping companies give ownership to average workers is as easy as repealing 123.By William M. Isaac and Richard M. Kovacevich by The Wall Street Journal on February 13, 2017

Stock Options for the Little Guy, Helping companies give ownership to average workers is as easy as repealing 123.By William M. Isaac and Richard M. Kovacevich by The Wall Street Journal on February 13, 2017

February 13, 2017

One message from last year’s election is that American workers are discouraged and angry that the “system” is not working for them. The standard of living for low- and middle-income Americans is not keeping pace with historical growth. Worse, there seems to be a widening income gap between average workers and corporate executives whose income is increased by stock options and other benefits available to them.

Many people see this as a lack of respect for the contributions of the average worker. An important first step in turning around this perception would be to develop an affordable way for corporations to provide stock options to all employees. That wouldn’t solve income inequality, but it would help.

Stock options weren’t always reserved for those at the top of the corporate ladder. It used to be rather normal for employees to have the option of purchasing shares in the company for which they were working. But in 2006 the Financial Accounting Standards Board issued a rule called FAS 123, which requires companies to account for stock options as if they were a cash expense, therefore reducing the net income of the company. FAS 123 also requires stock options to be recognized as more shares outstanding, thus diluting share values for the company’s existing stockholders. This double cost became so expensive that nearly all corporations eliminated stock options for employees making less than $100,000 a year.

 

Here is the link to the full article

Winding Down Fannie and Freddie Is Easier Than It Seems By WILLIAM M. ISAAC and RICHARD M. KOVACEVICH published by The Wall Street Journal on December 15, 2016

Winding Down Fannie and Freddie Is Easier Than It Seems By WILLIAM M. ISAAC and RICHARD M. KOVACEVICH published by The Wall Street Journal on December 15, 2016

December 16, 2016

Donald Trump’s Treasury secretary nominee, former Goldman Sachs executive Steven Mnuchin, says he and the president-elect want to privatize the home-mortgage market and “will get it done reasonably fast.” That’s good news for American homeowners, the economy and taxpayers who were forced to foot the bill after the 2008 subprime mortgage meltdown.

For those familiar with global mortgage markets, this is not a radical proposal. The private sector provides mortgages in most major countries, and there is little difference in the share of homeownership between the U.S. and other developed countries. No other country has the equivalent of the private-public model of Fannie Mae and Freddie Mac—crony capitalism at its best.

The U.S. needs a new mortgage system that preserves the value that currently exists with Fannie and Freddie, never places taxpayers at risk again, promotes homeownership at affordable levels, and transitions to a new private model without disrupting the housing industry. Congress will also need to resolve the issues with shareholders of Fannie and Freddie resulting from the Obama administration’s unilaterally changing the terms of conservatorship in 2012 by seizing their capital and future profits.

Mr. Mnuchin won’t have to start from scratch. Positive steps have already been taken. Back office and securitization functions of Fannie and Freddie are being combined to increase efficiency. Fannie and Freddie’s huge portfolios are being reduced (albeit much of the reduction has been added to the Federal Reserve’s portfolio). The companies have also repaid taxpayers more than $240 billion against their $187 billion bailout.

Yet many politicians and industry participants believe that housing cannot prosper without government support. We disagree. The U.S. cannot afford to go through another financial crisis, which started with subprime mortgages and would never have been so large if the residential mortgage industry had been market-based.

Here is the link to the full article

How to Fix the Volcker Rule By WILLIAM M. ISAAC and RICHARD M. KOVACEVICH published by The Wall Street Journal on December 4, 2016

How to Fix the Volcker Rule By WILLIAM M. ISAAC and RICHARD M. KOVACEVICH published by The Wall Street Journal on December 4, 2016

December 4, 2016

President-elect Trump has promised to dismantle the 2010 Dodd-Frank financial law. Democrats have promised to keep it. The likely outcome is that the most controversial parts of the law will be altered by Congress or regulators. The Volcker rule, which Mr. Trump’s Treasury secretary pick, Steven Mnuchin, last week called “way too complicated,” would be a good place to start.

Named for former Federal Reserve Chairman Paul Volcker, an early proponent, the rule is intended to impose strict limits on commercial banks engaging in “proprietary trading”—i.e., investing bank capital to make speculative trading profits. Mr. Volcker himself thought a simple, four-page rule would suffice. Wishful thinking? The product of multiple financial regulatory agencies, the Volcker rule has ballooned to nearly 300 pages with more than 2,800 footnotes.

There is no evidence that proprietary trading caused or even contributed to the 2008 financial crisis. But like many financial products, especially making loans, there is substantial risk in proprietary trading. We believe this risk should be carefully and intelligently monitored and regulated.

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Isaac Comments to CFPB on Proposed Short-term Lending Regulations

Isaac Comments to CFPB on Proposed Short-term Lending Regulations

October 12, 2016

Submitted via www.regulations.gov

The Honorable Richard Cordray
Director
Consumer Financial Protection Bureau
1275 First Street NE
Washington, DC 20002

Ms. Monica Jackson
Office of the Executive Secretary
Consumer Financial Protection Bureau
1700 G Street, N.W.
Washington, D.C. 20552

Re: Comments on the Proposed Rule for Payday, Vehicle Title, and Certain High-Cost Installment Loans

Dear Director Cordray:

As a former chairman of the FDIC, a consultant to financial institutions, and a consumer advocate,[1] I am very concerned with the prospect of regulations inadvertently strangling the small-dollar, payday loan market, thereby destroying a lifeline of credit for millions of responsible, low- and middle-income Americans. Thus, prior to the Consumer Financial Protection Bureau’s proposal on payday, vehicle title, and high-cost installment loans (the “Proposal”),[2] I was both hopeful and anxious about the upcoming rules.

In crafting the Proposal, the CFPB had the potential to help tens of millions of Americans who rely on these forms of credit. The CFPB plan could have eliminated regulatory uncertainty, which might have helped spawn innovation and improved lending options. However, I was also concerned that the CFPB might overreach and the rules could have negative, unintended consequences.

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Time to Restructure Debts of Chicago and Illinois is Now, published by The Bond Buyer By William M. Isaac

Time to Restructure Debts of Chicago and Illinois is Now, published by The Bond Buyer By William M. Isaac

September 8, 2016

Both the State of Illinois and the City of Chicago are in dire fiscal straits. Taxes keep rising, while staggering amounts of red ink are projected as far as the eye can see.

The city and the state should act now to restructure their liabilities and put the fiscal mess behind them. This can be accomplished by utilizing Chapter 9 and other tools Congress just gave Puerto Rico. The process would entail about two years of unpleasant headlines, but the city and the state will rebound far sooner and less painfully than if they stay on their current paths.

Illinois has the worst credit rating of any U.S. state. Republican Governor Bruce Rauner was elected in 2014 with a mandate to get the state’s financial house in order, but he and the Democrat-controlled legislature are at an impasse. Illinois is overdue on about $8 billion owed to healthcare providers and other vendors. If spending growth follows its 10-year average, the State projects a cumulative deficit of $17.5 billion over the next three years alone.

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Bring Back Glass-Steagall? No Thanks, By WILLIAM M. ISAAC and RICHARD M. KOVACEVICH published by The Wall Street Journal on August 8, 2016

Bring Back Glass-Steagall? No Thanks, By WILLIAM M. ISAAC and RICHARD M. KOVACEVICH published by The Wall Street Journal on August 8, 2016

August 9, 2016

The convention platforms of both political parties call for restoring the widely discredited Depression-era Glass-Steagall Act, which separated commercial from investment banking. What could they be thinking? Have they already forgotten the causes of the panic of 2008-09?

Some people mistakenly believe that investment banking is so risky that it should be separated from commercial banking. In truth, traditional investment banking entails very little risk and certainly less than traditional commercial banking.

Traditional investment banks engage primarily in underwriting debt and equity for corporations; providing advice on mergers, acquisitions and divestitures; buying and selling securities for institutions; and helping clients hedge their interest rate, commodity and foreign-exchange risks. Investment banks accept very little risk on their books in carrying out these activities.

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