By: Martin Gould and Kathleen Walter

Both the United States and Europe are probably already in recession – and if they’re not, they soon will be, says former FDIC chairman Bill Isaac.

“It wouldn’t surprise me if we learned that the U.S. is already in one, maybe Europe’s already in one,” he said in an exclusive interview with Newsmax.TV. “We know about these things after the fact. We usually don’t know when we go into a recession that we are in one, but this sure feels like a recession.”

Isaac, who headed the Federal Deposit Insurance Corporation in President Reagan’s first term, was speaking on the day the Dow Jones Industrial Average fell 419 points to close below the 11,000 mark. “I don’t know of anybody who could be bubbly about this economy right now,” he said.

“We have to be concerned about what’s going on in Europe and it seems that Europe is headed to a recession at the very least and that’s certainly not good for the U.S. economy.”

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The only hero in the U.S. fiscal crisis is the tea party movement, says former FDIC Chairman Bill Isaac. In this Newsmax.TV video, Isaac contends that U.S. markets are reacting to bad policy after President Barack Obama ignored the Simpson-Bowles commissions findings.


Isaac said the stock market responded to a series of disappointing economic reports but the underlying problem is poor fiscal policy. “Any bad news is going to spook this stock market because you can’t be buying in this market with any conviction because of the uncertainty we have in this country.

“There’s enormous uncertainty right now and we’ve got a major election coming up in 2012 and it looks like we are not going to be able to come to grips with things politically until after that election’s over.”

But he said there is a way out. The markets “would applaud and would take off in a very positive direction” if politicians got together and agreed to reduce entitlement spending over time, adopted a flatter tax system with few, if any, deductions and moved to a “more normalized” monetary policy.

“Zero interest rates are not where we ought to be. It’s very harmful to people who have saved all of their lives and now they are not getting any return on their money.

“If our political leadership could get together and say… we’re going to create a climate where people can be confident in the future; they can be confident that the dollar is going to be sound; that the federal government is going to get its finances in order. If we were to come to an agreement on a plan of that sort, the markets would soar.

“There’s an awful lot of liquidity out there that would like to go to work.”
Isaac blamed politicians – and especially President Barack Obama – for the financial mess. Tea party followers, he said, are the only ones who came out of the debate looking good.

“We’re all to blame,” he said about the crisis. “The only heroes that I see are the people that have been vilified, the tea party people, the conservatives who were elected in the House of Representatives, because they actually have tried to stand strong and say ‘No more. We’re going to have to change these policies.’”

“They deserve a great deal of credit for standing firm and arguing it’s time now to get this crisis under control and I give them all the credit in the world,” says Isaac, now global head of financial institutions at FTI Consulting.

But Obama has “given us very poor leadership on the issue,” he added. “He could have gone down in history as a great president if only he had adopted the recommendations of the Simpson-Bowles Commission on the debt crisis,” said Isaac, the author of a new book, “Senseless Panic: How Washington Failed America.”

“The bi-partisan commission came out with a number of recommendations that were really quite positive,” he said. “I wrote an article at the time they came out and said this is a good starting point. These folks are on the right track, and if President Obama wants to go down in history as a great president, he should embrace this report and say, ‘OK folks, let’s put aside our differences and let’s try to figure out how we…make it happen.’

“But he didn’t. He walked away from it. He didn’t give it any attention at all. Then we get to the 11th hour on the debt ceiling debate and we’re in turmoil because we didn’t debate the issues months earlier when we should have.”

Now, Isaac, who was only 34 when President Carter first appointed him as the youngest-ever FDIC board member in 1978, sees little hope for immediate action to remedy what he calls “20 years of irresponsible fiscal policies in this country.

“I don’t think anyone really believes this supercommittee is going to do anything meaningful.”