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


columns from William Isaac in top financial publications
Risk Sharing Is No Substitute for Capital at Fannie and Freddie by William M. Isaac published by American Banker on Oct 6, 2015 Posted: Oct 6, 2015

In recent weeks, the debate over what to do about the mortgage giants Fannie Mae and Freddie Mac has shifted from wholesale replacement to genuine reform.

Fannie and Freddie, now in the eighth year of a conservatorship that began in the depths of the financial crisis, remain in in limbo even after paying back nearly $238 billion to taxpayers — that’s $50 billion more than they were ever loaned in the first place.

But that’s not to say that we’re any closer to Congress actually acting on GSE reform. Politics has something to do with the government’s inaction, but so does the complexity of redesigning the entire housing finance market. Replacing Fannie and Freddie with an untested model would be impractical, if not destabilizing, for our housing economy. According to Federal Reserve data these two companies support $4.5 trillion of the $9.9 trillion U.S. mortgage market for one- to four-family residences. There simply isn’t enough private capital to fulfill the role they play without raising mortgage rates substantially.

Shelby’s Bill Is the Right Way Forward on Financial Reform by William M. Isaac published by American Banker on May 19, 2015 Posted: May 21, 2015

Community and regional banks across the United States are badly in need of regulatory relief. A bill proposed by Sen. Richard Shelby is poised to give it to them—but it is in need of one important change.

The Senate Banking Committee is scheduled to take up Sen. Shelby’s Financial Regulatory Improvement Act of 2015 this week. The bill would fix at least some of the problems that the Dodd-Frank Act has caused for community and regional banks and their customers, without undermining the law’s objectives of protecting consumers and ensuring the safety of the financial system.

Of the “fixes” contained in Sen. Shelby’s bill, most are narrow and unlikely to provoke controversy or alarm. Two provisions stand out among all the rest.


Here is the link to the full article

Let Fannie and Freddie Breathe, By William M. Isaac, Published by FTI Journal, May 11, 2015 Posted: May 11, 2015

The Inspector General for the Federal Housing Finance Agency (“FHFA”) recently reported that, due to a lack of capital reserves, Fannie Mae and Freddie Mac might need more government bailouts if housing markets decline.

This problem is the result of a 2012 decision by the U.S. Department of the Treasury to sweep Fannie’s and Freddie’s profits into the federal government’s coffers. This net worth sweep is illegal and economically dangerous. It needs to end.

It’s not difficult to understand why another bailout of Fannie and Freddie would raise concern. Acting under the Housing and Economic Recovery Act, Treasury rescued the mortgage giants from insolvency in 2008 with $187 billion of taxpayer money. Nobody wanted taxpayers to assume the $5 trillion in liabilities on Fanny’s and Freddie’s balance sheets, and the United States needed to reassure bondholders (mostly foreign) that they weren’t about to be wiped out. And so, after being rescued, the two companies were placed into a conservatorship administered by the FHFA, with a mandate to “conserve and preserve” Fannie and Freddie for their shareholders while the companies rebuilt capital.

Nearly seven years later, Fannie and Freddie remain in conservatorship. As of December 31, 2014, they had repaid the government $227 billion — roughly $40 billion more than they were loaned. Yet instead of allowing the companies to build a reserve like any large financial institution, the administration is stripping both companies of 100 percent of their profits.

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Choking Off Native American Economic Development, By William M. Isaac, Published by Law360, New York, April 10, 2015 Posted: Apr 16, 2015

I was intrigued when I first heard of a government program called Operation Choke Point and the concept behind it. According to the federal government, the operation was intended to keep illegal or fraudulent entities out of our banking system —– an important mission that could help protect consumers and businesses alike.

Unfortunately, multiple congressional investigative reports have revealed that Operation Choke Point has not been used primarily for this purpose. Instead, it has been targeting legitimate businesses, which some federal officials find personally objectionable, by pressuring banks to cut off accounts, payment processing abilities, and services to verify customer accounts. Industries like pharmaceuticals, dating services, tobacco sales, firearm dealers, coin dealers, small-dollar lenders, and many more were attacked — in many cases, not because they broke any laws, or were even accused of breaking any laws, but because some bureaucrats don’t like them.

How the Fannie and Freddie Conservatorship Has Undermined the Resolution Process By William Isaac and Senator Bob Kerrey Posted: Apr 6, 2015


Seven years after the crisis that rocked the global financial system, we are still rebuilding and redesigning its structure and rules – and probably will be for years to come. As policymakers engage in this process, laws enacted to address the crisis must be faithfully executed or formally amended.

Otherwise, the government would introduce uncertainty into a marketplace that can ill afford it. Regrettably, uncertainty is precisely what is occurring with regard to the mortgage banking giants commonly known as Fannie Mae and Freddie Mac.

In the summer of 2008, the world’s largest secondary financial market was unraveling. Given the size and systemic significance of Fannie Mae and Freddie Mac in the mortgage finance market, the Treasury Department intervened, based on authority granted to it by Congress in its passage of the Housing and Economic Recovery Act (HERA). Treasury invested $187 billion in senior preferred stock in Fannie Mae and Freddie Mac, carrying a ten percent dividend. As part of the deal, the government also effectively acquired ownership of 79 percent of the GSEs’ common stock. As structured, these terms avoided a complete government takeover of the GSEs and protected taxpayers from future bailouts. The government was right to insist on tough terms given its indispensable role in restoring stability into the marketplace.

FANNIE AND FREDDIE MAY NEED MORE BAILOUTS By William M. Isaac Published by Wall Street Journal, APRIL 1, 2015 Posted: Apr 2, 2015

The Inspector General for the Federal Housing Finance Agency (FHFA) recently reported that Fannie Mae and Freddie Mac might need more government bailouts if housing markets decline. The problem: lack of capital reserves to serve as a buffer against future losses.

The FHFA’s warning wasn’t the first. Last month on an earnings call, Fannie Mae CEO Tim Mayopoulos also warned that the company’s lack of capital “increases the likelihood that Fannie Mae will need additional capital from Treasury at some point.”

This problem is no accident: It is the result of a deliberate decision in 2012 by the Treasury Department to sweep Fannie’s and Freddie’s profits into the federal government coffer. Treasury’s “net worth sweet” is illegal and economically dangerous. It needs to end.

Here is the link to the full article


It’s an honor to deliver this keynote address at the annual meeting of the Consumer Financial Services Association. CFSA members are important providers of consumer credit, particularly payday loans to lower and middle income borrowers.

These have been difficult times for many of you, particularly in light of what has been at times a hostile government environment at the federal level. Bank regulators, and more recently the Department of Justice with its Operation Chokepoint, have been forcing out of the banking system many companies offering small dollar loans, check cashing, and other services vital to working people. Over the past two years many of your companies engaged in lawful business activities have been cut off from access to check clearing, deposit accounts, and other routine banking services required to keep any company in operation.

Operation Choke Point Won’t Go Away Quietly by William M. Isaac published by American Banker on February 19, 2015 Posted: Feb 27, 2015

The Justice Department program Operation Choke Point set a dangerous precedent by pushing banks to sever relationships with lawful businesses. Now the Federal Deposit Insurance Corp. is taking important steps to undo the damage — but some people apparently haven’t gotten the memo.

The FDIC issued a financial institutions letter in late January encouraging banks to manage their risks on a customer-by-customer basis rather than by grouping entire industries according to “reputational risk.” The effort, spearheaded by FDIC chairman Martin Gruenberg and vice chairman Thomas Hoenig, was accompanied by an internal memo to FDIC supervisory personnel outlining new procedures to be followed if and when examiners direct banks to cut off customer relationships. The directive to the bank must be in writing and receive prior approval from appropriate management personnel at the FDIC. Examiners must also have a sound legal basis other than “reputational risk” for demanding that banks end services to customers.

These actions are good news for thousands of legal lending businesses and the customers who rely on them.

Unfortunately, not everyone is on the same page with the FDIC. Bloomberg reports that Early Warning, a fraud prevention company owned jointly by several large banks, is cutting off some lenders’ access to valuable account data. Until now, the data had been available for both banks and nonbanks to use in their underwriting and fraud detection practices.

Here is the link to the full article

Don’t Like An Industry? Send a Message to Its Bankers By William Isaac Published by Wall Street Journal, November 21, 2014 Posted: Nov 26, 2014

The Justice Department touts its Operation Choke Point as a good-faith effort to crack down on illegal businesses, weed out fraud and protect consumers. None of these claims is true.

It is becoming clear that the real goal of the program announced last year—or at the very least a desired collateral benefit—is to target entire industries deemed undesirable by putting regulatory pressure on the banks that serve them. The House Oversight and Government Reform Committee recently released evidence that “federal regulators are pressuring banks to terminate relationships with legal yet disfavored industries, without regard to the legitimacy or risk profile of individual companies,” Last week, the Federal Deposit Insurance Corp. and Justice Department announced that they will launch investigations into Operation Choke Point.


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Sound Financial Regulation Essential to Sustainable Economic Growth By William M. Isaac Posted: Nov 11, 2014

[The following article was published November 10, 2014 by the SEACEN Financial Stability Journal, a quarterly journal published by The South East Asian Central Banks Research and Training Centre.]

I have traveled to Asia many times over the past thirty years, and it is my sense
that policy makers in Asia tend to look to the U.S. for leadership on financial regulatory
issues. This is somewhat unfortunate, as the U.S. has made many mistakes in financial
regulation in recent decades. In my view Asia and the rest of the world should not
emulate the U.S. but should instead study the U.S. to learn from both our successes
and our failures in financial regulation. I hope to provide in this article an objective
and candid assessment of U.S. financial regulatory policies.

Here is the link to the full article