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Senseless Panic is a provocative, quick-paced, and thoughtful analysis of what went wrong with the nation’s banking system and a blunt indictment of United States policy.

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For decades, William Isaac’s insights on the U.S. financial system have been featured in leading news publications. Now, you can browse them all in one location.

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in leading business publications
Don’t Forget the 1980’s by Alex J. Pollock Posted: Feb 27, 2015

It should be a deeply sobering thought for Americans that the U.S. housing finance sector has collapsed twice in the last three decades. Of course, we know that there was the painful shriveling of the huge U.S. housing and mortgage bubble of the 2000s, but only twenty years before there was the mass failure of the savings and loan (thrift) industry, up to then the dominant mortgage lenders, first from interest rate risk and then from bad loans. That resulted in the failure of the government’s savings and loan deposit insurance fund, which required a $150 billion taxpayer bailout. The bonds sold in 1990 to finance that bailout run to 2030, so the taxpayers will be paying for the 1980s bailout for 15 more years from now! Does the U.S. as a nation have a natural ineptitude for housing finance? Moreover, the savings and loan crisis was mixed together with a severe commercial banking crisis.

Here’s a financial history quiz: How many U.S. thrift institutions and commercial banks do you think failed or had to get government assistance in the 1980s crisis? Before you read the answer, what’s your number?

About that $191B Profit from the GSEs By Erika Morphy Posted: Feb 18, 2015

WASHINGTON, DC—Last week when the White House released its budget for fiscal year 2016, it included one eyebrow-raising line item: it assumed that Fannie Mae and Freddie Mac could return $191.2 billion in profits to the US Treasury over the next decade if they continue operating under federal conservatorship.

The item gave the commercial real estate industry pause for a few reasons. This number 1) assumes the GSEs will remain under federal conservatorship 2) it assumes that the lawsuits filed by GSE shareholders disgruntled by the government’s decision to sweep all profits from the GSEs back to the US Treasury will go nowhere 3) it assumes the GSEs will continue to bring in record profits.

After the Housing Crisis, a Cash Flood and Silence By Gretchen Morgenson Posted: Feb 17, 2015

On Aug. 17, 2012, the federal government began expropriating all the earnings of Fannie Mae and Freddie Mac, the mortgage finance giants that succumbed to the 2008 crisis.

Now the government is taking extraordinary measures to keep secret the deliberations surrounding that action. What exactly is it trying to hide?

That is the question being asked by a Fannie and Freddie shareholder who has sued the government over the 2012 profit grab. The investor contends that the move amounted to an improper taking of its property; the government disagrees.

Margaret M. Sweeney, a judge in the Court of Federal Claims, will determine who is right. But in the meantime, consider the remarkable secrecy demands that the government has made in the matter.

Here is the link to the full article

REGULATION OF SHADOW BANKING TAKES A DARK TURN A ‘chain’ of routine securities transactions, the Fed suggests, can transform a non-systemic firm into a systemic firm By Peter J. Wallison Posted: Feb 12, 2015

Feb. 9, 2015

Recent statements by senior Federal Reserve officials show that the agency is stepping up efforts to investigate and ultimately regulate what they call the “shadow-banking system.” As the regulators define that term, it is nothing less than capital and securities markets—the industries principally responsible for the growth of the U.S. economy over the past 40 years.

In December, Stanley Fischer , the Fed’s vice chairman and head of its internal systemic-risk committee, told an asset-management group that the New York Fed is “mapping” the relationships between and among financial institutions with a view to determining the scope of the shadow-banking system. The Fed, he said, is considering whether it has sufficient authority to regulate shadow banks. If it doesn’t, he said, the Fed will turn the matter over to the Financial Stability Oversight Council—created by the Dodd-Frank law and made up of the heads of all federal financial regulators, with the Treasury secretary as chairman—for appropriate action.

THE BIG LIE: 5.6% UNEMPLOYMENT By Jim Clifton, CEO of Gallup Posted: Feb 6, 2015

Here’s something that many Americans – including some of the smartest and most educated among us – don’t know: The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.

Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is “down” to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.

None of them will tell you this: Here is the link to the full article

America Is Exhibiting A Symptom Of A Dying Free-Enterprise System By Tony Sagami Posted: Jan 28, 2015

[Jim Clifton, CEO of the Gallup Poll organization, wrote recently that “For the first time in 35 years, American business deaths now outnumber births.” Clifton’s finding is both shocking and very disturbing for our nation’s future economic growth and employment. In an article published by Business Insider, Tony Sagami discusses Clifton’s finding and its implications for our nation. I recommend the article to you.]

“For the first time in 35 years, American business deaths now outnumber business births.” —Jim Clifton, CEO, Gallup Polls

I’ve been self-employed since 1998, and let me tell you, the life of a business owner isn’t easy. It’s filled with long hours, a relentless amount of paperwork, and uncertainty of where your next paycheck will come from. If you’ve ever owned a business, you know exactly what I’m talking about.

Here is the link to the full article

Can Banks Resist the Real Estate Temptation? By Alex Pollock Posted: Jan 28, 2015

[Alex Pollock, Resident Fellow at the American Enterprise Institute, authored an interesting and informative piece covering the evolution of real estate lending by banks over the past 150 years. I recommend it to you.]

“Strewn all over was the wreckage of the banks which had become entangled in the financing of real estate promotions and had died of exposure to optimism.”

That memorable statement is from Jesse Jones, the head of the 1930s U.S. Reconstruction Finance Corporation, describing Chicago in 1932. But it applies to many banking sectors in many countries, before and since, of course including the destructive real estate bubbles of our 21st century. Having financing available for real estate, especially for home ownership, is a good idea, but not when leverage and optimism run to extremes, as they often do, historically speaking. Real estate is the most common element in credit over-expansions and busts and a permanent temptation to banks.

Here is the link to the full article

The Illegitimate Dodd-Frank Law Has Nothing to Do With the Financial Crisis By Peter J. Wallison Posted: Jan 17, 2015

[Peter Wallison is the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute. His book on the financial crisis, “Hidden In Plain Sight: How the U.S. Government’s Housing Policies Caused the Financial Crisis and Why It Can Happen Again”, was published today by Encounter Books. The following article by Peter was written for RealClearMarkets.]

From the time it was first proposed by the Obama administration early in 2009, the legislation that eventually became the Dodd-Frank Act was opposed by Republicans in Congress. It got no Republican votes when it passed the House and only two Republican votes when it passed the necessary procedural vote in the Senate.

The reason for this nearly unanimous Republican opposition is simple: the key provisions of the act bore little relationship to the actual causes of the crisis. Indeed, the record shows that in designing and adopting the act neither the Obama administration nor the Democratic Congress made any effort to understand why there was a financial crisis in 2008 or the role of the government’s housing policies in bringing it about.

SIXTY SECONDS WITH LISA SERVON Posted: Nov 12, 2014

[The most recent issue of NGENUITY JOURNAL, published by the leading payments system processor TSYS on whose board I serve, contains an insightful interview with Lisa Servon, professor of urban policy at The New School for Public Engagement. Professor Servon talks about unbanked consumers, her experience working at a payday lender and check casher, and how banks can regain trust. I found the interview compelling and recommend it to you through the link below.]

Here is the link to the full article

FORMER WELLS FARGO CHAIRMAN AND CEO SPEAKS OUT ON BEST PRACTICES IN BANKING AND FINANCIAL REGULATION Posted: Nov 11, 2014

[Dick Kovacevich, retired Chairman & CEO of Wells Fargo, is one of the most successful and respected bankers in modern history. He recently provided a wide ranging interview on the secrets to success in banking and on the appropriate role for financial regulation. The interview was conducted by Daniel Emmanuel, founder and head of The Asian Banker.]

Link to the video: