Former FDIC Chairman recommends a path forward based on decades of experience
NEW YORK (JULY 30, 2024) – William (“Bill”) Isaac has released a new white paper on much-needed reforms for U.S. bank regulation and deposit insurance. The paper, “It’s Broken, So Let’s Fix It” uses Mr. Isaac’s decades of experience in banking and regulation to make recommendations on accounting rules, regulatory oversight, deposit insurance reform, and better and more effective US-centric capital rules. He also recommends the creation of a Federal Financial Regulatory Board (FFRB) to eliminate unnecessary regulatory complexity, redundancies, and gaps.
Bill Isaac has an unparalleled career in the financial industry and public service, spanning over 50 years. He was the youngest ever board member and Chairman of the FDIC, appointed to the board by President Carter in 1978 at age 34 and serving as Chairman from 1981 through 1985 under President Reagan. Mr. Isaac created a leading consulting firm upon leaving the FDIC and currently serves as Chairman of Secura/Isaac Group, a global advisory firm that serves financial institutions, non-banks, FinTech firms, central banks, and domestic and international regulatory agencies. Isaac is also a former Chairman of Fifth Third Bancorp and former board member at American Express Bank.
Mr. Isaac served at the FDIC during what remains the most severe banking crisis since the Great Depression. Over 3,000 banks and thrifts failed during the period from 1978 through 1992, including Continental Illinois, nine of the ten largest banks in Texas, and numerous other major banks throughout the country. He worked closely with the late Federal Reserve Chairman Paul Volcker and Treasury Secretary Donald Regan to maintain stability in the financial system, including developing an emergency standby plan among the FDIC, the Fed, and the Treasury to nationalize the major banks if it became essential due to the looming global debt crisis. Fortunately, the global crisis was contained without needing to implement the plan.
Mr. Isaac’s call for the creation of the FFRB stems from the fact that the U.S. bank regulatory system is the result of over two centuries of ad hoc “band-aid” fixes to solve specific historical problems and crises. Mr. Isaac calls for an overhaul to design a system that will work long-term, rather than the complicated and inefficient system in place today, which unnecessarily doubles up on some functions while letting other areas slip through the cracks.
Furthermore, Mr. Isaac insists on modernizing the deposit insurance system by imposing “haircuts” on depositors over the insurance limit while improving and better targeting deposit insurance coverage, covering 100% of all non-interest-bearing checking accounts held at failed banks, removing unnecessary inefficiencies at the top of FDIC operations, removing the President, the Secretary of the Treasury, and the head of the Consumer Financial Protection Bureau from involvement in decisions at the FDIC, and adding a Governor of the Federal Reserve Board to the FDIC’s board of directors.
Other issues covered in the paper include the need for improved regulatory oversight to ensure that banks are properly managing risks, and the dangers of global uniformity in bank regulation, including the Basel Capital Accords. Mr. Isaac calls for smarter regulation coupled with greater market discipline.
Mr. Isaac is the author of Senseless Panic: How Washington Failed America with a foreword by Paul Volcker. His articles are published in the Wall Street Journal, Washington Post, New York Times, Financial Times, American Banker, The Hill, and other leading publications. He also appears regularly on television and radio and testifies before Congress.
“After decades of watching us repeat the same mistakes, I know from experience that we are at a crucial moment for banking regulation in this country,” said Mr. Isaac. “I hope that by putting my recommendations out there, we can move the needle toward crucial reform of bank regulation.”
The full paper can be read here. For a print copy of the paper, please contact Secura/Isaac Group here.
About Secura/Isaac Group
Secura/Isaac Group (securaisaac.com), a global advisory firm led by former FDIC and Fifth Third Bancorp Chairman William Isaac, helps clients navigate today’s complex regulatory landscape and implement important industry initiatives. The team of highly experienced former bankers, regulators, and finance executives helps the financial sector address unprecedented challenges brought about by rapid advances in technology, growing cybercrime activity, and a shifting regulatory landscape. This includes assisting banks as they seek additional capital and helping them anticipate and respond to regulatory challenges.