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

BankThink A simple fix to brokered-deposit battle by William Isaac published by American Banker on March 12, 2019

BankThink A simple fix to brokered-deposit battle by William Isaac published by American Banker on March 12, 2019

March 12, 2019

The American Bankers Association recently released a report from a major law firm detailing the legislative history of the Federal Deposit Insurance Corp.’s battle against bank purchases of deposits from money brokers, continuing a policy debate that began over 30 years ago when I was chairman of the FDIC. The ABA report suggests that over time the FDIC may well have gone further than necessary in addressing the underlying problems with the practice.

I believe the ABA report is responsible and helps illuminate a possible solution to the issues that have arisen with the FDIC’s rules. That said, I’m concerned that the rhetoric of some bankers paints the FDIC’s restrictions on brokered deposits as antiquated vestiges of a bygone era of no value in today’s rapidly evolving internet era.

Let’s take a quick look at the origins of the restrictions in order to better understand the problem and a possible solution. Deregulation of interest rates in the 1980s gave rise to the practice of money brokers raising vast sums of money and bundling the funds for sale to the banks and thrifts that bid the highest prices, generally those that had the highest risk profile. The then-$100,000 limit on deposit insurance flowed through to each of the thousands of investors in the money broker, allowing hundreds of millions of dollars to be placed by the deposit broker fully insured in each bank.

As the bank and thrift failure rate began its dramatic rise, we found an increasing number of failed banks and thrifts had large amounts of fully insured brokered funds. We concluded we had to take strong actions to stop this massive abuse of the deposit insurance system which was under siege.

Link to the full story Click here

High taxes are driving away the tri-state golden geese, by Stephen Moore and Arthur Laffer published by NY Post on February 13, 2019

High taxes are driving away the tri-state golden geese, by Stephen Moore and Arthur Laffer published by NY Post on February 13, 2019

February 13, 2019

“This is the flip side [of] tax the rich, tax the rich, tax the rich. The rich leave, and now what do you do?” Gov. Andrew Cuomo asked this month, and it’s a vexing question.

When Congress enacted President Trump’s tax reform a little over a year ago, many economists, ourselves included, predicted that the lower tax rates would supercharge the national economy but could cause big financial problems for the tri-state region of New York, New Jersey and Connecticut.

The cap on the state and local tax deductions at $10,000 raised the highest effective state tax rates to 12.7 percent from 7.7 percent in New York City, to more than 10 percent from 6.5 percent in New Jersey, and to 7 percent from 4.2 percent in Connecticut.

The danger was clear: Unless these states cut their taxes sharply, they would witness an exodus of wealthy residents, who would migrate to low-tax states like Florida, Tennessee and Texas, taking their money with them and dramatically diminishing the tax base in their home states.

Cuomo is now calling the SALT change “diabolical.” But Albany sat back and did nothing. Ditto for legislators in Hartford. And in Trenton, they raised taxes.

The exodus may already be underway.

Link to the full story Click here

IT’S ALL ABOUT STOCKS – AND IT SHOULDN’T BE! by William Dunkelberg Chief Economist of the National Federation of Independent Business

IT’S ALL ABOUT STOCKS – AND IT SHOULDN’T BE! by William Dunkelberg Chief Economist of the National Federation of Independent Business

January 4, 2019

Critics of the Federal Reserve are popping up everywhere. They say that the Federal Reserve is not paying attention to “what markets are telling” about the economy. Critics have forgotten what impact zero interest rates had and are still having. If investors can’t earn anything in bonds, they put their money into stocks and real estate, bidding up those prices. When interest rates start to normalize (e.g. rise), bonds become more attractive, and money flows into bonds rather than stocks.

Another perspective – shares of stock in a company reflect the earnings the company makes and is expected to make. The price of the share multiplied by the number of shares outstanding is the value of the company. Similarly, the value of our stock markets must collectively reflect the value of USA Inc., the value of the production of all of our companies taken together.

Share prices have not been connected to reality for some time, thanks to the Federal Reserve artificially holding rates down for so many years. This created distortions that will still take years to resolve. Since 2008, the S&P 500 stock index has risen 110 percent. But our output, measured by GDP, has increased only 25 percent over the same period. This indicates that the growth in output owned by each share has lagged far behind the share price, or, viewed another way, there is less real output per dollar of share price, a lower real return. So, as interest rates rise, bonds provide an attractive alternative to owning stocks and stock prices will weaken as investment money shifts to Tbonds.

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Anderson: Southwest Florida residents remember George H.W. Bush published by Herald Tribune on December 9, 2018

Anderson: Southwest Florida residents remember George H.W. Bush published by Herald Tribune on December 9, 2018

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.

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