WILLIAM ISAAC’S PUBLISHED WORK

There’s considerable debate these days on whether the roles of chairman and CEO should be separated in publicly held companies. I’ve reviewed hundreds, if not thousands of failed and problem banks – both as chairman of the Federal Deposit Insurance Corp. and as a consultant since leaving the FDIC. I have also served for the past three years as nonexecutive chairman of Fifth Third Bancorp. These experiences have given me a unique perspective on the chairman/CEO issue and on corporate governance generally.

The first observation I offer is that much of the debate about the chairman/CEO issue is misdirected, trivialized and too emotional. Unfortunately, any discussion or consideration of the issue is too often taken as a personal affront to the CEO involved.

Where have all the leaders gone? That’s the question I hear everywhere I travel at home and abroad. I can’t answer the question, but it caused me to reflect on what makes a good leader.

When I think of leaders I admire, the first thing that stands out is their vision. A leader knows where he or she wants to go and communicates it well. Margaret Thatcher and Ronald Reagan were great leaders because they had very clear visions of where they wanted to take their countries. They articulated a few major priorities and devoted their administrations to achieving them. Reagan’s predecessor, Jimmy Carter, was a good and principled man but did not have a successful presidency primarily because he couldn’t – or at least didn’t – adequately explain to the nation where he wanted to lead us.

Last week, President Obama nominated Penny Pritzker, a philanthropist and successful businesswoman, to be Commerce secretary . I have known Pritzker for over a decade and believe she will be an outstanding secretary of Commerce and a great ambassador for the U.S. throughout the world. In my view she will be among the most able in the president’s cabinet – someone with considerable experience in business and job creation.

Since her nomination, some have said that her experience as chair of Superior Bank in Illinois – an S&L that failed in 2001 as the economic boom of the 1990s receded and the NASDAQ bubble burst – disqualifies her for the post. I was not involved at Superior Bank or with the Pritzker family prior to the bank’s failure but was quite involved after its failure so I believe I have a unique vantage point to comment on those events.

[I was honored to deliver an address on the importance of sound bank regulation to a sound economy at the 49th Annual Conference on Bank Structure & Competition hosted by the Chicago Fed on May 10, 2013.]

SOUND BANK REGULATION

CRUCIAL TO SOUND ECONOMY

By

WILLIAM M. ISAAC

Former Chairman

Federal Deposit Insurance Corporation

Senior Managing Director

FTI Consulting

Chairman

Fifth Third Bancorp

Before

FEDERAL RESERVE BANK OF CHICAGO

49th Annual Conference on Bank Structure & Competition

Chicago, Illinois

May 10, 2013

It’s a great honor and privilege for me to appear before this esteemed group of academics, regulators and financial industry practitioners.  I’m particularly honored to be included as a speaker alongside Chairman Bernanke, Comptroller of the Currency Curry, and Acting Director of the Federal Housing Finance Agency DeMarco.

I began my career at Foley & Lardner law firm in Milwaukee and always looked forward to attending this Annual Bank Structure and Competition Conference hosted by the Chicago Fed to learn the latest thinking on bank competition and regulation.  I confess that many of the presentations were over my head but I absorbed what I could.

I had the honor of delivering a keynote address to the Asian Banker Summit 2013 in Jakarta, Indonesia on April 23, 2013 followed by an address that evening at the Asian Banker Awards dinner celebrating excellence in leadership among the Asian Banks. I gave the keynote address again on April 26, 2013 at an Asian Banker conference in Shanghai, China. It was a busy time as I also participated in panel discussions and dialogues with government officials and bank CEOs from around Asia. Without question, Asia is very dynamic and the Asian banking system is evolving very rapidly. Both of my addresses in Jakarta follow, and I hope you will find them provocative and constructive.

It seems nearly every politician is jumping on the band wagon to end too big to fail banks, but almost no one is suggesting a realistic way to bring it about without inflicting serious damage on the economy. We suggest a plan that will get the job done.

Banks are essential to economic growth. People enjoy cursing banks from time to time, but in truth society cannot prosper without the loans and access to the capital markets they provide to businesses and individuals.

There have always been bank failures and always will be. The trick is to allow sufficient risk taking to promote economic growth but not so much that it leads to widespread bank failures and panic.

Given the long history of financial crises, we should acknowledge that regulators are not capable of preventing them without turning banks into government-controlled public utilities that are inhibited from taking sufficient risks to support economic growth.

Here is the link to the article.