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.

MEDIA COVERAGE

in leading business publications

Anderson: Southwest Florida residents remember George H.W. Bush published by Herald Tribune on June 9, 2017

Anderson: Southwest Florida residents remember George H.W. Bush published by Herald Tribune on June 9, 2017

December 9, 2018

William Isaac was just 34 when he joined the board of the Federal Deposit Insurance Corporation in 1978.

The country was on the precipice of a banking crisis that would stretch throughout the next decade.

Isaac — a Lido Key resident who remains the youngest FDIC board member in U.S. history — would end up serving five years as chairman of the agency, a job that put him in contact with George H.W. Bush back when Bush was vice president.

A wave of bank failures in the 1980s kept Isaac extremely busy. The financial turmoil led to calls for reform.

In the early 1980s Isaac participated in a federal task force on reforming the nation’s financial regulators. It was led by Bush.

Isaac met with Bush privately and in group settings as the task force worked on a plan. The problem, Isaac said, is that the financial regulatory system had evolved piecemeal over 100 years and lacked proper coordination, which resulted in failures to identify problems.

Here is the link to the full article

BankThink We can do better on de novos By Jelena McWilliams published by American Banker on December 6, 2018

BankThink We can do better on de novos By Jelena McWilliams published by American Banker on December 6, 2018

December 6, 2018

The 12th Chairman of the FDIC wholeheartedly supports the 21st Chairman in her efforts to streamline the FDIC’s applications processes and to encourage the formation of new banks throughout the country. Community banks are essential to economic growth and we need more of them, not fewer. Bill Isaac

Recently, I went to a small community bank to open a checking account. I drove away from Washington and entered a branch of a small bank. It’s a transaction I easily could have made from home — over the phone or online — but I wanted to experience firsthand what consumers across the country experience when they visit a community bank. Community banks are characterized by their relationship-based practices. And my visit was no exception.

I was greeted with a smile and an offer of candy. While the patient branch manager went through the requisite paperwork to open my account, a customer walked in with his 3-year-old daughter. Mary ran up to the teller to give her a hug. The father said that, as they drove by, Mary insisted on stopping by the bank to say “hi.” The bank manager smiled and told me, “She has been coming here since she was born.” It felt like I just entered a Norman Rockwell painting.

Small banks like these are slowly disappearing from America’s landscape. Today, 627 counties are only served by community banking offices, 122 counties have only one banking office, and 33 counties have no banking offices at all.

The banking landscape in the United States has changed dramatically in the last few decades. After remaining fairly steady for more than three decades, the total number of banking and thrift charters declined from around 15,160 in 1990 to 5,670 at the end of 2017. The share of industry assets held by the top 10 banking organizations rose from 19% in 1990 to 51% at the end of 2017.

I do not profess to know what the right number of banks in the U.S. is, but I recognize that, like many competitive industries, a dynamic banking sector needs new startups entering the marketplace. De novo banks are a key source of new capital, talent, ideas, and ways to serve customers. Most de novos are traditional banks that offer services and products to underserved communities and fill gaps in overlooked markets.

Over the past decade, de novo activity has screeched to a historic halt. As FDIC chairman, one of my key priorities is to encourage new bank formation. The FDIC needs to do its part to make that happen.

Link to full article here

A Regulatory Vendetta Exposed A lawsuit shows how the feds tried to destroy a legal industry.

A Regulatory Vendetta Exposed A lawsuit shows how the feds tried to destroy a legal industry.

November 7, 2018

You may recall that the government went on an unlawful vendetta during the Obama administration against payday lenders and some 30 other lawful industries (e.g., tobacco and ammunition retailers) the government did not like by putting pressure on banks to decline to take care of the banking needs of these lawful businesses.  This illicit campaign inflicted major economic damage on the targeted industries.  I wrote several articles and testified before Congress in opposition to this unconstitutional abuse of power.  It will be difficult to unscramble the government’s omelet, but there are promising signs on the horizon, as explained in an editorial from the Wall Street Journal on November 6, 2018.  A link to full editorial is below, and I highly recommend that you read it:

Click here for the Full Story

BankThink Evidence is now clear: Operation Choke Point hurt lawful businesses By Congressman Blaine Luetkemeyer

BankThink Evidence is now clear: Operation Choke Point hurt lawful businesses By Congressman Blaine Luetkemeyer

October 29, 2018

BankThink Evidence is now clear: Operation Choke Point hurt lawful businesses

As a former community banker, I had the amazing opportunity to work with many members of my community on their journey to the American dream. Whether it’s the first loan to open a small business or credit to hire more workers, financial institutions are critical partners for individuals and businesses as they strive to achieve success through hard work and dedication.

For the last five years, I have fought to end the Obama Administration’s ideologically driven initiative to kill legitimate businesses, aptly named “Operation Choke Point.” Former Federal Deposit Insurance Corp. Chairman William Isaac went as far as to call it “one of the most dangerous programs I have experienced in my 45 years of service as a bank regulator, bank attorney and consultant, and bank board member.” In this unprecedented initiative, unelected bureaucrats at the Department of Justice, the FDIC and other agencies set out to kill legal businesses by starving them of access to financial institutions.

Link to full article here

10 years later, Lehman’s real lessons for investors

10 years later, Lehman’s real lessons for investors

September 9, 2018

10 years later, Lehman’s real lessons for investors

Ken Fisher of Fisher Investments is highly knowledgeable participant in the investment world. Ken published an article on September 9, 2018, in USA Today, looking back on the lessons of the government’s mishandling of the failure of Lehman Brothers, which failed ten years ago and was an important trigger for the ensuing global panic and the economic destruction that followed. Ken was nice enough to quote from my book, “Senseless Panic: How Washington Failed America.” Below is the link to Ken’s article, which I believe you will enjoy reading.

Link to full article here 

Another Plea From Fannie Mae, an editorial published in the Wall Street Journal, February 15, 2018

Another Plea From Fannie Mae, an editorial published in the Wall Street Journal, February 15, 2018

February 15, 2018

Another Plea From Fannie Mae
The mortgage ward of the state needs $3.7 billion from taxpayers

Fannie Mae is again going hat in hand to taxpayers after announcing a $6.5 billion quarterly loss on Wednesday. Washington should take this news as a kick in the keister to finally start winding down the mortgage giant and its busted brother, Freddie Mac . But the Trump Administration seems to be moving in the opposite direction.

When the housing mania turned to panic in 2007-08, Fan and Fred called in their implicit government guarantee, at a cost of almost $190 billion. The pair, now in “conservatorship,” have since paid back that amount, and their profits continue to flow to the Treasury—as they should, given that the taxpayer guarantee hasn’t been revoked.

The trouble is that Fan and Fred were left in limbo. Hedge funds bought up their shares, betting they could pressure Washington into bringing back the old business model of public risk and private reward. Investors filed lawsuits claiming that the government was illegally seizing Fan and Fred’s earnings.

Fannie’s latest dip into the Treasury will be dismissed as an accounting fiction—and maybe so, but it’s a useful one. Congress’s recent tax reform decreased the value of tax deferrals on Fannie’s balance sheet, resulting in a one-time charge of $9.9 billion. Because Fannie hasn’t been allowed to keep a large capital buffer, it now needs a $3.7 billion infusion. While this is hardly ideal, at least taxpayers are getting the profits along with the losses.

Continue reading →

Ed Pinto, Co-director, American Enterprise Institute Center on Housing Markets and Finance, is a friend of mine and a distinguished authority on housing finance. I thought you might be interested in seeing Ed’s predictions for the housing markets in 2018

Ed Pinto, Co-director, American Enterprise Institute Center on Housing Markets and Finance, is a friend of mine and a distinguished authority on housing finance. I thought you might be interested in seeing Ed’s predictions for the housing markets in 2018

December 29, 2017

 

1. The historically tight supply of single-family homes will tighten further in 2018 after hitting a record low in November 2017: on December 21, 2017 the National Association of Realtors (NAR) announced that November 2017 remaining inventory of existing homes for sale hit a record low of 3.4 months–eclipsing the prior record of 3.5 months reached in both January 2005 and January 2017. Expect new lows to be recorded for December 2017 and January 2018. January is projected to come in at around 3 months. This tight supply trend has been going on for 5+ years.

2. The national home price boom that began in mid-2012, will continue, and given the unprecedented low levels of inventory, will even accelerate further: expect year over year increases of 6.25% -6.75%, up from about 6%-6.5% in 2017. The substantial reduction in the utilization of the mortgage interest deduction and commensurate reduction in subsidies, will somewhat reduce upward pressure on home prices. Without the tax act, the prediction for 2018 home price increase would have been even higher: 6.75%-7.25%.

3. First-time buyers (FTB) will face even higher home price gains for entry level homes. Expect year-over-year gains for the bottom third of homes to come in at 10.5% to 11% for 2018 (December 2018 over December 2017 based on 16 tiered HPI from CoreLogic Case Shiller). At current levels of wage growth, this boom in entry level home prices is ultimately unsustainable.

4. First-time buyers (FTB) will continue take on even more leverage in an effort to keep up with the out-sized home price gains on entry level homes. The AEI First-Time Buyer National Mortgage Risk Index is expected to rise to 17.1% for September 2018 agency originations, up from to 16.4% for September 2017. Risk scores above 12% have a high risk of default under severe economic stress.

Time To Drain The Fed Swamp. By First Trust, published by First Trust Advisors L.P., Monday Morning Outlook

Time To Drain The Fed Swamp. By First Trust, published by First Trust Advisors L.P., Monday Morning Outlook

September 13, 2017

The Panic of 2008 was damaging in more ways than people think. Yes, there were dramatic losses for investors and homeowners, but these markets have recovered. What hasn’t gone back to normal is the size and scope of Washington DC, especially the Federal Reserve. It’s time for that to change.

D.C. institutions got away with blaming the crisis on the private sector, and used this narrative to grow their influence, budgets, and size. They also created the narrative that government saved the US economy, but that is highly questionable.

Without going too much in depth, one thing no one talks about is that Fannie Mae and Freddie Mac, at the direction of HUD, were forced to buy subprime loans in order to meet politically-driven, social policy objectives. In 2007, they owned 76% of all subprime paper (See Peter Wallison: Hidden in Plain Sight).

At the same time, the real reason the crisis spread so rapidly and expanded so greatly was not derivatives, but mark- to-market accounting.

Continue reading →

Making Housing Sane Again, an editorial published in the Wall Street Journal, January 9, 2017

Making Housing Sane Again, an editorial published in the Wall Street Journal, January 9, 2017

January 9, 2017

Making Housing Sane Again

If you think most equity investors have been in an ebullient mood since Election Day, consider the euphoric owners of Fannie Mae and Freddie Mac. With both stocks soaring more than 130% since Nov. 8, Fan and Fred shareholders are ready to do the Juju on That Beat in the middle of Wall Street. The Trump Administration needs to shut down this block party before it gets out of hand.

The cause for revelry is the expectation that Treasury secretary nominee Steve Mnuchin is going to revive the Beltway model of public risk and private reward. When the Senate Finance Committee hosts his confirmation hearing, likely soon after Inauguration Day, lawmakers should extract a promise that he won’t.

Fan and Fred’s owners feasted for decades on implied taxpayer guarantee before the housing crisis. Since everyone knew the two government-created mortgage giants would receive federal help in a crisis, they were able to run enormous risks and still borrow cheaply as they came to own or guarantee $5 trillion of mortgage paper. When the housing market went south, taxpayers had to stage a rescue in 2008 and poured nearly $190 billion into the toxic twins.

Continue reading →