YouSaid · the spoken record

Bill Isaac

lines on the record: 114
first: 2023-08-22
most recent: 2023-08-22
sittings or episodes: 1
sources: podcast

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“Back in the bad old days, they couldn't. Because they were not used to that new climate where interest rates are going to be that high and variable. But today... A bank is supposed to understand. and manage its interest rates. And not, you know, hedge things, not just bet. I mean, not just place bets on the current market. Supposed to hedge their bets. And you can hedge things. Now, that doesn't mean that somebody is going to lose somewhere along that line because when banks and others hedge, they're betting. And somebody's got to take the other side of that bet. So the losses may show up somewhere”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Think that's going to be a similar thing for banks these days if interest rates go up drastically in this case from 0% to 5.5%, how can banks manage when they made all these mortgages at three or four percent?”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Keep rates decent and reasonable ranges. And it started to spend money on wars, Vietnam and so forth. And great society programs and all sorts of stuff, college programs. And they started spending a lot more money than they had. So prices start to go up. And then interest rates start to go up. And those savings in banks and savings and loans, which were doing their job that they were asked to do, suffered because interest rates went up. And they had all these long-term loans funded with low-cost deposits. And depositors said, we don't like the deposit rates anymore. We want to go to the money market funds and get twice as much interest. And so that's what they did. And it drove the savings and loans and the savings banks out of business. They couldn't afford to carry those long-term loans.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“So that's setting them up. If the climate stays the way it should be, where we're not overspending and causing inflation and all this sort of stuff, an interest rates would go up, that works. And it did work for 30, 40 years. But eventually... And I'll take the savings bank industry, which the FDIC did ensure. They were all about housing, all about long-term fixed rates, mortgages. And they were doing good things for the public. And they were doing what Congress and the regulators expected them to do. But then the government didn't keep its part of the bargain.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Well, that's a good question. And they are separate issues. Although sometimes related. Because you've got duration issues eventually become. Credit issues The reason why you have a problem with duration is you're losing money for so long. It's eating up your capital. But anyway. But almost all banks, when they get into deep trouble, are either suffering from duration problems. Credit quality problems. And sometimes they're intertwined too. I don't know how to say what is what, but I would tell you that We dealt with the inflation period problems in the 1970s and 80s. Almost all of them, well, let's say to thrifts, the savings and loans were required by law to make mortgage loans. That's about all they could do. And they were strongly encouraged to do as long-term fixed rate mortgages.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“How are we not going to have a budget deficit there of consequence? I mean, significant consequence. But look what happened in World War II. We won it. We spent a ton of money. Lost a lot of lives. But we won the war. And then we started after the war to demonstrate our leadership to the world. We maintained responsible fiscal and monetary policies. And it didn't get out of control until. I would say started to get out of control in the 60s. So we had. 20 years where the government really behaved properly. The Fed and the Congress. Maintain discipline. They had deficits, but they were not a control. They weren't too large for in terms of our ability to repay. And we did some great programs. The Interstate Highway Bill? Wow. The TVA and all that. So we did a lot of investing. What we didn't do crazy things.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“We see what happens when the governments start spending money that it doesn't have in large volumes. That's what caused the 1980s problems. That's what happened. That's what caused the depression way back in the 30s. That's what happens. That's what's happening now. Government, and we see it in other countries who once had a lot of power. Britain used to have the central bank for the world. It doesn't anymore. It couldn't carry the burden and be disciplined long enough. And everybody that's tried it has not done it right. And I believe the FDI, the USA could do it. I believe the United States does have the ability to do it if we can get some discipline and maintain it. And that's the hard part. This is not, to me, this is not difficult stuff. It's not rockets on it.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“I know, which is why the families can't spend forever. And that's why businesses can't spend forever, because they can't print money.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“And that's the tough part because it means that we can't just do anything we want to do. If we want to tell all the students that we'll give you free college education. We'll pay off all your debts in college, which allows the colleges to spend more money in the government, pays it back because the students can't afford it. And we've got to stop stuff like that. And we need to, we know how to behave. We really do. This is not difficult stuff. The federal budget is. I mean, most of us as families have to deal with budget issues. We can't just spend anything we want because it seems like a good idea”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“And monetarily because we are the leader of that in the world. But although we're losing that position, if you look at what's going on, I mean, we have been the central bank of the world and people and the currency that the world uses, the dollar. But we're losing that position because we're not doing a very good job of it. I'm sure China would like to have that role. I'm not sure if they will. I'm not sure if they will have the discipline they need to take that role on. But no country has kept it forever. Eventually, it's too much for them. They can't maintain the discipline. And I'm hoping that we can prove that wrong. I'm hoping that we can prove that we can be the central bank. For the world, forever. The odds are against it. But I think there's no reason why we couldn't if we can maintain our discipline.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Well, they had a lot of problems and a lot of issues. And it was not fun for them to go through what they've been going through. And I admire the fact that they've really tried to keep going. And Japan has a lot of discipline, a lot more than we have had. And so I don't want to be critical of them, but I don't think their problems are the same problems we had. And also we are a We are a country that provides leadership to the whole world. And we're supposed to be being responsible fiscally”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Which came first the chicken or the egg i i think these things these things are all tied up with one another in japan does not have a great track record uh you know japan's economy was really really strong in the 80s and and then they went through 20 years of just Lackluster performance at best and falling population. I mean, Japan has not got a great record here, economic record over the last 30 years. Right, but not inflation.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“I mean, I know Hooker, and I've seen a number of Fed chairmen and Greenspan, they normally complain. Maybe Jay Powell's too polite. He is a nice person. And he's not, maybe he's not comfortable criticizing the Congress. But I know other Fed chairmen that I've known pretty well who took were not afraid at all to criticize the Congress for uncontrolled fiscal policies.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Against excessive spending and have urged the Congress to get budgets under control. And I know for sure Voker did almost as soon as he got up in the morning and read his newspaper. I mean, he was quite clear about what he thought about government spending. And technically, it's not his job. The house enacts budgets in the Senate approves them and the president signs them. So that's where all that happens. But the Fed, when the Congress spends a ton of money, there's a lot of pressure on the Fed to provide the money to support that. I mean, Congress is spending all that money, the Fed. tends to provide more currency and more bonds and so forth. So they complain about it usually.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“He doesn't enact the legislation, okay? And he's probably saying that's what Congress is supposed to be doing and the president is setting the budget. But I can tell you that most Fed chairmen that I've known, and I've known a few, Always have, I've almost always spoken out.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“But they can't I mean, eventually everything becomes too expensive for the ordinary folks. Now, There are some people who do all right in an inflationary environment, and they tend to be people who have good jobs. good assets. They own a lot of assets. And so their assets are going up in value just fine. The price of a home just keeps on going up. If you already own the home and you don't have debt, that's a great deal. So it's rich folks who don't have a lot of debts that can get through inflationary periods just fine. But that's not very many of us. It's a very small proportion of our people. And it's not the 80% of the people. who have a fairly normal life, who have debts.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“In prices that haven't yet risen. There's a lot more money around, so there's a lot more demand for goods. And so goods naturally start to cost more. And we see that in so many ways. Go to the grocery store. It's going to cost you more to buy eggs and beef and so forth, everything. And it happens when you go to the gas pump. Gasoline's costing you a lot more. And by the way, I went to the FDIC in the late 70s and my memory is that back in that era, we had gasoline that was less than a dollar a gallon. Maybe not when I went to the FDIC, but earlier than that in that period. It shows you how much things, how much cost has been added and how much Less money we have in relation to the cost of goods. When gasoline goes from a dollar a gallon, $5 a gallon That tells you you're going to get a lot more of your paycheck to go to work.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“He's one of the greatest Americans we've ever known. And I have nothing but admiration for him. And he's just a brilliant guy and so bold and had the public interest always in mind. But anyway, it does cost money to borrow, more money to borrow when rates go up. And that does make it more expensive for you to buy your house or run your business or buy your car. And therefore, it tends to cause a reduction in demand. And inflation, when inflation happens, there's a lot more money around.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“I'm not going to talk about Paul because he can't speak for himself right now, but he has lots of books he's written and people can study him. I got one.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“the problems with COVID and all that. And then Biden comes in and he seems to not recognize there are any limits. It's unbelievable how much money. He's still giving away $30 billion or trillion dollars to the student loan program. And I mean, just things that are so, they don't make any sense. They really don't. And it's not just him because there's a lot of people in the Congress that are doing that. And I'm not trying to be partisan. I really am not. And I've named a bunch of names. And you see they're from both parties. And so I think that, but we know what went wrong in the 80s, 70s, and 80s. We know what went wrong this time. And there's no excuse for not fixing it and stop this nonsense. harmful to the people to ordinary people.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“In 2000, which is when this started. And we had the World Trade Center and the war in Iraq and that sort of stuff. And one thing led to another. And Obama comes in and he has a lot of deficit spending on domestic programs. And then Trump comes in. He had a lot of spending. And then you had the...”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“With help from New Gingrich, really controlled federal spending and brought inflation, continued to bring inflation down and kept the federal deficit under control, good control. At one time, we were talking about in the early 1990s in the late 1990s, we were saying that we were going to be able to wipe out the federal deficit entirely because Clinton and Gingrich were running the country so well in terms of spending money and keeping the government spending under control. And then we go into the 2000s and beyond, you know, for the next 20 some years. I don't recognize the fiscal policies and I don't recognize the monetary policies. They were so wrong. They were so out of control. We shouldn't have done that, but it was done by Democrats and Republicans because you had George W. Bush.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Deciding to kill inflation when a couple of Republicans between the 60s into the 70s, a couple of Republicans were in office, but they never controlled the Congress. And so the Republicans were trying to deal with inflation, but not very successfully. And then it was Jimmy Carter who came in and appointed Paul Voker and said, fix this. And so I give Jimmy Carter a lot of credit for that. And then we go into the Reagan era and followed by the Clinton era. And I'll give, I know what Reagan did, Republican did to try to bring inflation under control and to build a sound economy. He did. You can't deny that. But then Bill Clinton came in and he with.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“I don't think you could make a good case for the Republicans have been much less likely to spend money. Everybody's spending money. I would say that if I look when inflation takes off, It has tended to take off when Democrats are in power. And I don't mean to, I'm not a highly partisan person. I actually think I'm going to say I'm not partisan. I try to be as sane in the middle of the road as you can be. But it's true that we had inflation takeoff in the 60s when we had the Vietnam War going on plus the great society spending programs. And we didn't raise taxes to pay for those things. And those were during mostly Democratic administrations. And those, but I'll also give Carter credit.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Because that's the consequence of rising interest rates and rising interest rates are the consequence of high inflation. Because you can't tolerate high inflation indefinitely because it destroys everything. Let me look at Brazil and Mexico and all the countries and what they went through. And we don't want that in the United States. And there's no need for it. I mean, not only is there no need for it, it is insane for a country like the United States to be doing the kinds of policies that it has been doing in terms of inflation and interest rates and big deficits that cause those things. It's insane. It really is. And nobody seems to care in Washington. I know that there are people who care. a lot but right now they're not in control”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“No, I think that Paul Voker had to, inflation is what caused the farm prices to rise, okay? And Voker and the Fed had to kill inflation. And that meant rates have to go up. And that means anybody who's borrowed, not everybody, but most people who borrowed are going to get hurt.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Well, some would say, you know, Paul Voker changed the price of money. It wasn't Congress. Congress spent a lot of money that they borrowed it, so the treasury had to borrow it, but it was the Federal Reserve that raised interest rates, right? When they have to pay more on their farm, don't look at the senator from Dakota. Like look at the Fed, r”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“That's what happens. And usually there are people who win in times like that, but mostly they aren't ordinary folks who win and they aren't farmers who win usually. And most businesses don't win. Some do. It's not fair because the government's changing the game, the rules, after people have made all these financial commitments, the government's changing the price of money.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Well, it affects banks in many ways. For example, when prices go up really high, it impacts consumers. They bought a house and now they can't afford the house or a business. They've got the capital they thought they needed, but now prices are all going up through the ceiling and they can't afford to run their business the way they need to run it. And they're going to have to raise prices, which means their customers are going to businesses are going to start losing money because they can't afford the debt. I mean, that's what bankrupted all the farms back in the late 1970s and early 1980s. They borrowed money to plant crops and buy their land. And then the interest rates went way up because inflation went up. And so the farmers couldn't afford their farm.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Things that were mistakes, but it was mostly the Congress and the federal government and the Fed made these mistakes back then and they repeated them all again in this period. And I think that's just, I mean, it's shameful. It really is. We shouldn't be going through this mess again. We didn't need to learn this lesson again. I don't want to just keep on repeating the same things, but that's where we are. There's nothing new about this crisis, except this one is even less explainable. I mean, you just don't understand why people would do this again. This shouldn't surprise anybody in Congress that if you spend Trillion that you don't have, that it's going to cause a lot of economic problems and going to hurt a lot of people and businesses.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“The major problem in the 70s and 80s was a government out of control. Fiscal policy, way too much debt, way too much federal debt. Too much spending without enough revenue. And then, you know, the Fed monetized that and, you know, goes into the banking system. And that leads to inflation and failures and all sorts of things. And we know what caused all those problems back then. We knew how that happened and we knew what we had to do to fix them, to clean it up. And it wasn't fun. And I know Paul Voker and I talked about it a lot. Why are they doing the same things again? Why are they making these same mistakes again? It seems like we lost two decades for no good reason. And beginning in 2000, roughly 2000, through today, all those mistakes that were made back then by the government, by the federal government. I'm not saying there aren't other problems. And I'm not saying there aren't some state governments that did some, you know, some.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“I mean, 30 years later, whatever it is. And I'm really disappointed that we didn't learn the lessons of the 1970s and 80s. And we had to go through the whole thing, same thing again. And I know, you know, Paul Voker and I became friends. We didn't start out as friends. We didn't know each other. But we became very close friends, dear friends. And I tremendously admired him And we talked a lot after he and I both left office. He lived in New York and I lived in Washington and Florida. And whenever I went to New York, I'd get together with him. We'd go to dinner or whatever. I'd go to his apartment. We'd talk. And I know how disappointed we both were when we saw that all those lessons we learned back in the 1980s and the expense of”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“that lesson again. We saw what happened back then, and you could say it was novel when it happened, and it was. But it's not novel today. You wonder why. Why did the regulators let them do that? They saw it. They weren't doing it quietly. They weren't doing it secretly. It was out in the open for all to see. Why did the regulators delay in getting on top of it? So I really think that Back in the 80s One of the things that I can say for sure, we were dealing with a lot of novel situations, Penn Square Continent, all this stuff. We had first Pennsylvania. These were things first of their kind. And we had a lot of lessons to learn and we had a lot of cleanup to do and we had a lot of rule changes to make. Why do we need to go through that again 20 years later”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“They were doing things for the most part that they shouldn't have been doing. They were growing very rapidly. And that's always a sign of future problems in all likelihood. And why did the regulators let them do those things? They tripled in size in like three years, a couple of them. And they made long-term loans, longer-term loans on fixed rate government bonds. Why would they do that? First Pennsylvania did that back in 1978 and made that same bet. And the FDIC and the Fed had to come in and deal with it. It was the largest bank in Pennsylvania, the oldest national bank in the country. Why do we need to learn?”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“And so we have to recognize that. And I don't think we'll ever go back to that world. Maybe we'll have another great depression and we'll have to go back, but I doubt it. And so I think that we are in a world that we need to understand better. We need to know how to regulate better. And we're learning those lessons, not fast enough. You talked about Silicon Valley Bank and the other recent failures. If you look at them, you wonder why in the world did they fail?”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“That's a stunning drop in the number of banks. But it also, we took off the interest rate controls. We let banks have much more freedom about pricing and the products they offered and we allowed more people into the banking business to compete, non banks and the like. And so it's a very different world. And the regulators have a lot of work to do to keep this stuff under control. And they don't always do it well. It was much easier being a regulator in 1940 than it is in 2020. Much easier back then because there were fewer, I mean, it wasn't nearly as competitive and aggressive as it is today. And so we've had to change the way we do things. I'm not saying this is worse or better. It's just different.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“And because we had no choice, because we reduced all those restraints on competition. And I'm not even going to preach about whether we should have done that or not. I'm just saying we did do it. And so it became a very different world. And we had way too many banks and bank offices because that was part of the thing we were doing. We were providing convenient services. And we didn't want banks to, we wanted banks to be readily available to make all the loans they could to consumers and homeowners and farmers and so forth. And then we found that we had done too much of that and that we had too many banks and they couldn't all compete. And so we really had to change the rules. And we opened up the playing field. And so we went from 13,000 banks. In 1980 4,000 banks today.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“and we allowed more competition among banks and drifts and so forth. And it became a more dangerous world because banks were able to compete with each other. And then we allowed money market funds to compete with the banks. And that caused banks to do things that were riskier. They would make riskier loans. They'd charge less money for them than they otherwise might and so forth. And so that whole system broke down and beginning around 1980, we had to deregulate the banking industry, largely deregulate it. And we allowed banks to have to compete with money market funds. And we allowed banks to branch in more places or go across interstate lines.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Compete so hard on rates that they would make bad loans and bad decisions. So we really didn't want a lot of competition from the depression forward. And we put the FDIC in place because we wanted depositors to feel safe and not have that money be fleeing quickly. We wanted depositors to put their money in and feel really comfortable that the FDIC would take care of their money if the bank made mistakes. The FDIC could fix it. And it was a good world and it worked that way for then we lost our way and we decided that we were willing to have more competition in banking. We allowed more banks to be formed. We allowed more branching to be done.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Back then it was a lot more difficult to deal with because we had a public policy of providing by law from the depression forward. We wanted to promote homeownership. And so we wanted borrowers to be able to get relatively low rate fixed rate mortgages. We wanted to promote housing and home ownership in the country. And so we also didn't want the banks and the thrifts competing for deposits and loans. We really tried to control competition because we didn't want so much competition that banks would do things that were not healthy economically. I mean, I would say”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“I didn't mean to get into a big lecture there, but the two periods resemble each other a lot. And the first one didn't have to happen the first period, the 80s. And clearly this one didn't need to happen because, I mean, we had just learned all those lessons. Why did we have to turn around and make the same mistakes again immediately? We at least could have waited 20 or 30 years.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“And today the Fed's debt is something like 11 or 12 trillion in that range. So we've really made some serious monetary and fiscal mistakes in this country. And we don't seem to be able to recognize them and cure them, particularly the fiscal mistakes we've made. And so we're going to have to go through a problem some more. And I really regret that. I think it's a shame. I think it's awful. It's irresponsible. But we did it and now we've got to figure out how to fix it. It can be fixed, but it takes a lot of political courage. And the public's going to have to be calm and let the people do what they need to do. And the politicians are going to have to be supportive of the monetary authorities to do what they need to do.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“2000, the last year of Clinton's administration 5.6 trillion of federal debt to 32 trillion or so today. Plus, the Fed had almost no debt back in that period on its balance sheet, about just under a trillion.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“enough and they do they just couldn't afford it and so we had it was a really really difficult period and the fed did what it had to do the FDIC did what it had to do and it all worked and and fortunately pretty much the politicians stayed out of it back in that period I'm not saying we didn't get a lot of complaints because we do get complaints always but the politicians pretty much stayed out of it and they let the Fed and the FDIC do what they needed to do and it all worked out in the end. I don't think we've handled things very well the last 20 years or so. There was a lot of damage done in the 80s and we worked really hard to fix it and then we incredibly decided to go back into all these problems. And we lost control of the deficits and we went from any year.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“And we did that. So I think what happened back then needed to happen. I wish we had done it this time a lot sooner. And I wish the Fed had not taken the interest rates down to close to zero and held them there for about 10 years. Those were the mistakes that were made. And now the Fed is doing what it has to do to clean up this problem that we've created for ourselves. So we're doing what we need to do with these rates. I know it's not fun. It wasn't fun for homeowners to see their mortgages go from 7% or 8% back in 1978 to, I don't know what they got up to. I think the home mortgage rates must have got up to something like 14 or 15%. And think of the small business loans and all the banks, I mean, all the farms that went broke, the farmers, because they had debt on their land. And the interest rates went.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“That was stunning. And that was from probably we began somewhere around 7% or 8% back in 1978 or so. And when Paul Voker came in in 1979, he started moving the rates up and they went up a long way and they went up quickly. And it was a really horrendously difficult period. And I mean, I don't I don't have any problems with what the Fed did and what Paul Voker did. I admire what they did. They did what they had to do. And it was effective. It stopped inflation, which was out of control. When we had to get inflation under control, they did. And then once the rates got to 21.5%, then we needed to go a different direction and try to get the economy more stable.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“That was a nightmare back then, and I'm sure it's not fun today. And I mean, I can tell all sorts of war stories. Well, Paul Voker. And the Fed raised the interest rates, the prime rate, the prime interest rate that banks lend on. He raised it to 21.5%.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“And I think we make a bit much of that now. I mean, I think what the FDIC has always tried to do is do things quickly and quietly so you have as little panic as possible. And you try to be very reassuring. You want your money, you're going to get your money. It might be tomorrow instead of today, but you'll get your money. Don't worry. And so the FDIC tries to keep things as calm as possible. And sometimes it gets out of hand because The FDIC can't get its story out because people are acting so quickly by their mobile phones that they're not listening to FDIC. They're listening to all the rumor mill. So anyway, it can be complicated.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“Up and actually would have it be done electronically because it's less of a mob scene. And the TV camera is taking pictures of the lines of people is not helpful. And so I almost would prefer that it be done quietly over the wires. But either way, it's fast. This doesn't happen slowly.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT
“All through that period, the 80s and the 90s and even into the 2000s, you had the same problems. It's a little bit more difficult today because of the speed with which money flows. But it flowed pretty quickly back then too. Let's say continental Illinois in the space of a week. They lost $20 billion. half their deposits and they were basically withdrawals mostly from Japan. So yeah, it wasn't an old-fashioned bank run. It was on the wires. What we're experiencing today is not new. It's probably a little more common. Probably a little bit faster, particularly involving retail depositors. They used to have to come to the bank and line.”
2023-08-22 · Forward Guidance · Government Debt Crisis Has Hit U.S. Banks | Bill Isaac, Former FDIC Chair · IDENTIFIED FROM THE TRANSCRIPT