By Molly Gray for The Lantern

William Isaac has one entity to blame for the devastating impact of the 2008 financial panic: Washington.

Isaac, who served as the chairman of the Federal Deposit Insurance Corporation (FDIC) during the 1980s, a decade that saw America’s last sweeping bank crisis, will be on campus at 1:45 p.m. tomorrow in Saxbe Auditorium in Drinko Hall to discuss his book, “Senseless Panic: How Washington Failed America.”

“I wrote ‘Senseless Panic’ out of a sense of frustration, and even anger, as I watched the financial crisis unfold and careen out of control,” Isaac said. “The economic circumstances and the circumstances within the financial industry in the 1980s were far more serious, in my view, than anything we were facing this time around.”

In his book, Isaac outlines several key reasons the most recent recession had a more sweeping and serious effect on the country’s economy, compared with previous bank failures.

During the ‘80s, 3,000 banks failed, compared with around 200 within the last two years. Banks closed in the ‘80s included the nation’s seventh-largest bank in Chicago and nine out of the 10 largest banks in Texas, Isaac said.

“And yet, through it all, we never had a financial panic,” he said.

According to a recent article in the Huffington Post, the gross domestic product grew at an annual rate of 7 percent to 9 percent for five straight quarters after the recession in the ‘80s, and the unemployment rate plunged from 10.8 percent to 7.2 percent in 18 months.

That amount of growth is still not being seen following the most recent recession, according to the analysis.

Isaac attributes today’s financial panic to several different factors, the first being that in the 1980s, the FDIC and the Federal Reserve were in charge of regulating the financial industry. Today, that job falls on the shoulders of U.S. Treasury members.

“The FDIC and the Federal Reserve are independent agencies. They are not political and they don’t have to make political decisions,” Isaac said. “I think that is a very important thing.”

Because Congress funds the U.S. Treasury and reports to the president, Isaac said he believes the decisions made there are highly political.

“One reason why we were able to get through the ‘80s successfully is that we anticipated problems,” Isaac said. “We were looking out months and years ahead.”

The inconsistency with which the current administration handled bank failures is evidence of the lack of preparation for the banking crisis, Isaac said.

According to a Reuters newswire article, Treasury Secretary Timothy Geithner told a commission investigating the causes of the crisis, in May, that “if the government had moved more quickly to put in place better-designed constraints on risk taking that captured where there was risk, the crisis could have been less severe, and if the government had moved more quickly to deal with the damage, this would have been less severe.”

Isaac also said the inconsistency led to a total system shutdown because banks all around the world stopped lending to each other out of fear and uncertainty.

Following the decrease in bank lending, the government issued the Troubled Asset Relief Program, or TARP legislation, which involved the U.S. Government purchasing assets and equity from financial institutions.

“In order to sell it, (the government) made very inflammatory statements,” Isaac said. “They called it a ‘financial Armageddon’ and said they didn’t know if the financial system was even going to be around in a week … it panicked the public even further and everyone stopped spending, and the economy flatlined in October of 2008.”

In his lecture tomorrow, Isaac said he hopes to educate students about the lessons he believes Washington failed to learn from the last financial crisis.

“Our political system is not working very well. Our country has a lot of problems right now,” Isaac said. “I don’t know how to fix it, except that I think we need to bring a lot of fresh blood in, whether it’s Democrats or Republicans. I’m a product of the ‘60s, and all of the reforms started on college campuses. We need that again.”

Admission to Isaac’s lecture is free, but students must register at moritzlaw.osu.edu/isaac. The lecture is co-hosted by the Moritz College of Law and the Fischer College of Business.