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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
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:

Underwriting the Next Housing Crisis By Peter J. Wallison Posted: Nov 3, 2014

[I urge you to read the following article from the New York Times by Peter Wallison, a Senior Fellow at the American Enterprise Institute, on the relationship between lax underwriting standards on housing loans and volatility in housing prices that hurts those who can least afford to take the hit. Peter’s analysis is spot on.]

WASHINGTON — SEVEN years after the housing bubble burst, federal regulators backed away this month from the tougher mortgage-underwriting standards that the Dodd-Frank Act of 2010 had directed them to develop. New standards were supposed to raise the quality of the “prime” mortgages that get packaged and sold to investors; instead, they will have the opposite effect.

Responding to the law, federal regulators proposed tough new standards in 2011, but after bipartisan outcries from Congress and fierce lobbying by interested parties, including community activists, the Obama administration and the real estate and banking industries — all eager to increase home sales — the standards have been watered down. The regulators had wanted a down payment of 20 percent, a good credit record and a maximum debt-to-income ratio of 36 percent. But under pressure, they dropped the down payment and good-credit requirements and agreed to a debt-to-income limit as high as 43 percent.

THE FINANCIAL CRISIS: WHY THE CONVENTIONAL WISDOM IS WRONG By Richard Kovacevich Posted: Oct 19, 2014

[Dick Kovacevich and I have been friends for over 30 years, having met in 1982 when he was a rising star at Citibank and I was Chairman of the FDIC. Dick retired a couple of years ago as Chairman & CEO of Wells Fargo & Co. I am hard pressed to identify any CEO of any major bank who has had a more distinguished and successful tenure at the helm than Dick. Importantly, he thinks straight and talks straight. Read the following piece by Dick Kovacevich published recently by the CATO Institute, which can be accessed through the following link]:

Here is the link to the full article

THE AMERICAN BANKING SYSTEM MIGHT NOT LAST UNTIL MONDAY By Alex Pollock Posted: Aug 19, 2014

[This article by Alex Pollock, Resident Fellow at the American Enterprise Institute, is absolutely must reading for those trying to make sense of what went wrong during the 2008-2009 financial crisis. As you read it, recall that government leaders proclaimed publicly during the crisis of 2008 that the financial system was facing “financial Armageddon” and also recall that mark to market accounting imposed senseless and massive paper losses on U.S. financial institutions during 2008.]

‘The American Banking System Might Not Last Until Monday’
By Alex J. Pollock Monday, August 18, 2014
Filed under: Economic Policy, Numbers

Learning from the crises you’ve forgotten.

How good is the human group mind at financial memory? Pretty bad.

For example, consider this really striking bit of history: “The then Federal Reserve Chairman made a phone call to the Bank of Japan Governor on that critical Friday night (Saturday in Japan) in August of that year.” The chairman’s “first words were that the American banking system might not last until Monday. The crisis was that serious.”

MEMORY AND FINANCIAL CYCLES By Alex J. Pollock Posted: Jul 16, 2014

[Alex J. Pollock is a resident fellow at the American Enterprise Institute in Washington, DC. He was President and CEO of the Federal Home Loan Bank of Chicago 1991-2004. The article is well worth your time reading. A somewhat shorter version of the article was published recently in the Wall Street Journal.]

Memories fade. It is now five years since the end of the most recent U.S. financial crisis of 2007-2009. Stocks have made record highs, junk bonds and leveraged loans have boomed, house prices have risen rapidly, already there are cries for lower credit standards on mortgages to “increase access.” Unlike the Swiss central bank, which marks its investments to market, the Federal Reserve has designed its own regulatory accounting so that it will never have to recognize losses on its $4 trillion portfolio of long-term bonds and mortgage securities, no matter what. Who remembers that such “special” accounting is exactly what the Federal Home Loan Bank Board designed in the 1980s to hide losses in savings and loans? Who remembers that there even was a Federal Home Loan Bank Board, which for its manifold financial sins was abolished in 1989?

Former FDIC Chief Answers The Question I Asked Bob Corker By Woody Woodruff of the Banking Law Connection, July 9, 2014 Posted: Jul 11, 2014

Nearly a year ago, I had the opportunity to have breakfast with Senate Banking Committee Ranking Minority Member, Sen. Bob Corker [R-TN]. OK . . . the imperative of full disclosure requires that I admit that I was merely one of about 150 people attending an industry group event in Nashville. Sen. Corker, home for the August recess, was making a number of appearances across the state of Tennessee and the event to which I was invited was merely the first of three stops he made that day.

He spoke on a number of topics, but the one to which he devoted the most attention was the conceptual legislation he and Virginia’s Democratic Senator, Mark Warner, were proposing in order to “reform” Fannie Mae and Freddie Mac. Sen. Corker explained his concept of replacing the two government-sponsored entities that facilitate the bulk of mortgage lending in America, with a single new government agency that would function somewhat like the FDIC. As he described it, this new mortgage insurance company would “protect the taxpayers” by having a layer of private capital that would account for the first 10% of the entities’ total capital, and would be the first layer exposed to the risk of default. The federal mortgage “insurance” would not kick in until this private equity layer was exhausted.