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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Countries don’t go bankrupt? The 20th century proves otherwise by Alex Pollock, Distinguished Senior Fellow of RStreet Institute published by RStreet online on February 25, 2016

Countries don’t go bankrupt? The 20th century proves otherwise by Alex Pollock, Distinguished Senior Fellow of RStreet Institute published by RStreet online on February 25, 2016

February 25, 2016

How risky is sovereign debt?

One memorable answer, “Countries don’t go bankrupt,” is attributed to Walter Wriston, the most prominent banker of his day and the chairman of Citibank from 1967 to 1984. That is right in a narrow legal sense, since a sovereign government cannot be put into bankruptcy. But in the general sense, everybody knows it is disastrously wrong: governments can and do go broke and not pay on their debt.

The 1980s dramatically falsified the Wriston answer. A large number of governments with heavy borrowings from U.S. banks were broke and defaulting. This led to highly-placed fears that the entire American banking system might be insolvent. So Paul Volcker, then Chairman of the Federal Reserve, papered over the crisis by ordering that the banks’ books be cooked and losses postponed. When the crisis broke in 1982, Volcker is reported to have said one Friday evening, “The American banking system might not last until Monday”!

Here is the link to the full article

Fed Decisions Really Just Come Down to Guessing, By Alex J. Pollock published by American Banker on December 8, 2015

Fed Decisions Really Just Come Down to Guessing, By Alex J. Pollock published by American Banker on December 8, 2015

December 9, 2015

Does the Federal Reserve know what it is doing? The answer is no. Furthermore, can the Federal Reserve know what it is doing? The answer is also no.

This is not because the officers of the Fed are not intelligent. They are indeed brilliant. It is because of the inherent unknowability at the heart of the Fed’s decisions. The central bank cannot possibly make much more of a guess about the complex and recursive factors at play in the world’s financial systems and economies.

That inherent inability to know what it is doing, combined with the central bank’s vast power, make the Fed the most financially dangerous institution in the world. However good the central bank’s intentions might be, its actions manipulate the world’s dominant fiat currency based on the debatable theories and guesses of a committee of economists. That can create disastrous financial instability. Since that is true, how can anybody think the Fed should be an independent power? That is a puzzle indeed.

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Can You Really ‘Know’ a Customer Who Uses Bitcoin? By Penny Crosman published by American Banker on December 1, 2015

Can You Really ‘Know’ a Customer Who Uses Bitcoin? By Penny Crosman published by American Banker on December 1, 2015

December 9, 2015

[Penny Crossman, editor in chief of the American Banker wrote a thought-provoking piece in the Banker on the handling of Bitcoin transactions by banks and bank regulators. I believe you will find the article interesting, which includes a quote from Bill Isaac.]

The long-running tension between anti-money-laundering rules and data privacy concerns is especially pronounced in the awkward relationship between regulated financial institutions and digital currency businesses.

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GOVERNMENT DID NOT SAVE THE ECONOMY By Brian Wesbury First Trust Portfolios

GOVERNMENT DID NOT SAVE THE ECONOMY By Brian Wesbury First Trust Portfolios

October 21, 2015

Brian Wesbury of First Trust Portfolios offers an interesting and spot on assessment of the government’s mishandling of the financial crisis of 2008. It will take just a few minutes of your time to listen to his commentary, and it will be time well spent.

Here is the link to the full Video

REFRAMING THE DEBATE ABOUT PAYDAY LENDING By Robert DeYoung, Ronald Mann, Donald Morgan & Michael Strain

REFRAMING THE DEBATE ABOUT PAYDAY LENDING By Robert DeYoung, Ronald Mann, Donald Morgan & Michael Strain

October 21, 2015

[ The following article about payday lending was posted by the Federal Reserve Bank of New York on its website, Liberty Street Economics, on October 19, 2015. It is an intelligent and balanced presentation of the issues, and I commend it to you.]

Except for the ten to twelve million people who use them every year, just about everybody hates payday loans. Their detractors include many law professors, consumer advocates, members of the clergy, journalists, policymakers, and even the President! But is all the enmity justified? We show that many elements of the payday lending critique—their “unconscionable” and “spiraling” fees and their “targeting” of minorities—don’t hold up under scrutiny and the weight of evidence. After dispensing with those wrong reasons to object to payday lenders, we focus on a possible right reason: the tendency for some borrowers to roll over loans repeatedly. The key question here is whether the borrowers prone to rollovers are systematically overoptimistic about how quickly they will repay their loan. After reviewing the limited and mixed evidence on that point, we conclude that more research on the causes and consequences of rollovers should come before any wholesale reforms of payday credit.

Here is the link to the full article

Fannie-Freddie Lawsuit Should Matter to the Masses by Joseph Colangelo, published by American Banker on September 4, 2015

Fannie-Freddie Lawsuit Should Matter to the Masses by Joseph Colangelo, published by American Banker on September 4, 2015

September 7, 2015

Most people are aware of the ongoing legal battle waged by Fannie Mae and Freddie Mac shareholders against the U.S. government. But the lawsuit also has broader implications for consumers that have thus far gone unacknowledged.

In the midst of the housing crisis, the two government-sponsored enterprises were placed into conservatorship under terms outlined in the Housing and Economic Recovery Act of 2008. This agreement allowed the entities to access Treasury funding and therefore continue providing liquidity to the mortgage market. In exchange, the government acquired a 79% ownership stake in the GSEs by way of purchasing common shares.

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ASSET PRICES ADJUSTING AS PREDICTED!!! by Bill Dunkelberg, Chief Economist, National Federation of Independent Business

ASSET PRICES ADJUSTING AS PREDICTED!!! by Bill Dunkelberg, Chief Economist, National Federation of Independent Business

August 25, 2015

WHEN WILL THIS BUBBLE BURST?

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National Federation of Independent Business

American consumers have about $14 trillion in debt and a net worth of over $80 trillion according to the Federal Reserve. Net worth is the sum of the values of all assets, real and financial, that consumers own, less their debt, including mortgage debt, leases, credit cards and the like. The wealth we hold is a way of storing purchasing power. You can sell your shares of Apple and buy “stuff”, goods and services. Ultimately, for most consumers, that’s what our wealth is used for, to acquire “stuff”. Some of our assets provide services directly such as our houses and cars. The real services received from these assets would seem to be unchanged over time even though their market prices vary. As the market value of your house rose and then fell, did the real housing services you received rise and then fall as well? Probably not.

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Just Do It, Janet: Time for a Fed Rate Hike by Richard M. Kovacevich

Just Do It, Janet: Time for a Fed Rate Hike by Richard M. Kovacevich

August 16, 2015

Why must we continue to read, listen, and converse about when the Federal Reserve will increase the Fed funds rate to an infinitesimal one-quarter of one percentage point? Just do it and get it over with.

A review of Federal Reserve’s unconventional monetary policies shows that few of the central bank’s recent actions have achieved their desired goals. Therefore the central bank has little to lose in moving ahead with such a minor rate increase.

The Fed put the U.S. through three rounds of quantitative easing. Through all of them, the economy limped along at an average gross domestic product growth rate of about 2.3%–the slowest economic recovery since World War II. After each round, observers worried that ending QE would be bad for the economy.

What happened? Very little. The economy is still growing at about the same sluggish pace. Long-term interest rates haven’t changed that much.

Meanwhile, the Fed has held off shrinking its balance sheet. This is a mistake. The central bank should allow its current $4.5 trillion securities holdings to decrease as principal payments and maturities occur.

Here is the link to the full article

Zero Hour: What the Fed’s Next Move Could Mean for the Economy, OUTLOOK Economic Data and Commentary by Alex Pollock

Zero Hour: What the Fed’s Next Move Could Mean for the Economy, OUTLOOK Economic Data and Commentary by Alex Pollock

August 16, 2015

[My friend Alex Pollock, resident fellow at the American Enterprise Institute, gave a very thoughtful and interesting interview on the Federal Reserve’s monetary policy strategies in recent years to Co Bank, a large cooperative bank serving the agricultural industry. I believe you will enjoy reading Pollock’s interview, and I highly recommend it to you. We are clearly in uncharted waters with monetary policies in the U.S. and throughout the world.]

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