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William Isaac, former FDIC chairman and author of “Senseless Panic,” weighs in on the economic recovery and the Treasury’s handling of it.
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-- -- nearly five years since the start of the nation's financial crisis but has anything really changed.
My next guest says he is deeply concerned about the fiscal and economic crises facing our nation -- says new leadership is what's gonna take to get the country moving in the right direction.
-- out former FDIC chairman William -- -- is the author of the newly released paperbacks pencils and it how Washington failed.
America but wind is good to have you on the show you talk first and foremost about this new book by former FDIC chairwoman.
Sheila Bair she really went straight after Treasury Secretary Geithner I've got to get -- reaction.
By the first I haven't read her book yet but I don't doubt that she went straight -- -- because they didn't get a -- very well when she was.
Chairman of the FDIC and he was he was secretary of the treasury.
So and and before that he was he was presumed New York fed I think date they fought quite a bit so doesn't surprise me she went after him in the book.
-- you have the chairman of the FDIC that was back in the early eighties but you know you faults treasury -- very specific treasury.
What a lot of the nation's problems basically saying that faith by the bush and the bottom illustrations was wrongly put.
On treasury basically on Geithner himself -- why that why that take from you at this point.
Well.
I I think that that see the whole crisis was who was bungled badly and that's really what the book.
That I -- is about this if it that's why it's titled how Washington failed America.
That Washington failed America first by allowing this crisis to develop.
We had very wrong headed policies over the previous decade or so.
That regulatory policies that that allowed this situation to develop and then once the crisis it.
The crisis was terribly mishandled by by the treasury treasury shouldn't be in charge of crisis management in the financial system.
Because it is a highly political agency and are not skilled at it.
One reason we kept -- to crisis and under control in the 1980s is it to Federal Reserve.
An independent agency and the FDIC an independent agency apolitical.
Handled the crisis and we didn't have a lot of involvement from treasury.
You know one of the things that that we heard from Hank Paulson basic -- Is he himself of course try to book after you is there.
I would -- to the end of the Bush Administration Paulson himself said that he was surprised.
By the financial crisis that hit back in 2008 I mean.
Why would -- be surprised.
When we had in particular home values that were so inflated.
That's a 64000 dollar question or sixty portraying -- recoup whatever numbers are using now I.
I've you know there were.
Portions of his books it did.
Really were hard to understand that.
That he was surprised that team did to pick their commercial paper market shut down -- for price surprised.
-- to money market funds had trouble he was surprised at Citigroup was on the edge.
He everything seem to surprise him.
Any any sort of went from crisis to crisis.
With ad hoc solutions and and and people lost confidence that the government knew what it was doing it they did -- one sale they bail out another -- -- let another one fail back and -- what's the policy.
And so I think I think to crisis was terribly mishandled by secretary Paulson and -- others involved and I.
Well -- -- and things so William though that he did do and frankly -- I've been on the air several times and I thought was the right and as you know letting Lehman go almost making that example Lehman Brothers putting the banks on notice we're not gonna be there for you.
We're not going to be downtown at the New York fed negotiating last minute deals on Sunday nights to save your.
Behind is basically I mean that was pretty bold move by Paulson you wouldn't -- done.
That same move that he had made.
Five years ago.
I I think that when -- when you have a crisis.
The first obligation the government has is to calm the crisis do whatever it takes to calm the crisis.
And that's what we did in the 1980s that I would tell you -- the 1980s.
Was far more threatening to the financial system in the economy.
Then then this episode in 2008 we actually have some 3000 some 3000 banks and thrifts failed.
In the 1980s including many of the largest banks in the country nine have a larger than ten largest banks in Texas for example failed.
While -- what the savings along crisis -- -- forgive me as a high school but it worried how the savings and loan crisis of the eighties -- you talking about just regular bank.
Failures I mean banks fell every year is that -- that I.
And that and I'm talking about both but for example continental -- the seventh largest bank in the country failed nine out of the ten largest banks in Texas failed.
Regional banks all over the country were failing Seattle first.
Southeast Bancshares.
The Bank of Boston and that Bank of Boston but Bank of New England.
And so we had major banks all over the country failing that yet.
We were able to keep people calm we did not have a crisis of confidence we did not have a run on the system.
And and that's what was missing in this time they needed to do whatever it took.
To calm the system and that and they didn't do it -- it is went.
Ad hoc solution after ad hoc solution stirred things up people lost confidence now.
I think that was a problem that that I -- I think the Bush Administration as secretary of the treasury in the Bush Administration.
Mishandled this crisis.
I also believe that once the Obama administration came in they did nothing to solve it and I think.
I what I really think that fifty barring that wasn't their plan I mean.
They get around but it is not as as those -- Paulson as this falls craftsmanship and any new left but anyway.
I don't know interviewers on the buckets in paperback now essentials panicked as a far by Paul Volcker by the way everybody had beat.
As we got me up blood on the book as well but -- -- residents now William thank you very much.
Thank you didn't -- pleasure to be with you --
