Senseless Panic: How Washington Failed America by Paul A. Volcker (Foreword), William M. Isaac (18-Jun-2010) Hardcover

by William M. Isaac

The 1980s opened with the prime interest rate at an astonishing 21.5 percent, leading to a severe recession with unemployment reaching nearly 11 percent. Depression-like conditions befell the agricultural sector, a bubble burst in the energy sector, a rolling real estate recession swept the country, the entire thrift industry was badly insolvent and the major money center banks were loaded with third world debt. Some 3,000 bank and thrifts failed, including nine of Texas' 10 largest, and Continental Illinois, which, at the time, was the 7thlargest bank in the nation. These severe conditions were not only handled without creating a panic, the economy actually embarked on the longest peacetime expansion in history.In "Senseless How Washington Failed America," William M. Isaac, Chairman of the Federal Deposit Insurance Corporation (FDIC) during the banking and S&L crises of the 1980s, details what was different about 2008's meltdown that allowed the failure of a comparative handful of institutions to nearly shut down the world's financial system. The book also tells the rousing story of Isaac's time at the FDIC. With accessible and engaging prose, Details the mistakes that led to the panic of 2008 and 2009Demystifies the conditions America faced in 2008, andProvides a roadmap for avoiding similar shutdowns and panics in the future

"Senseless Panic"is a provocative, quick-paced, and thoughtful analysis of what went wrong with the nation's banking system and a blunt indictment of United States policy.

Genres: Politics, Business

190 pages, Hardcover

First published January 1, 2010

Reviews

[M Thomas · Rating 5 out of 5]

Bill Isaac ran the FDIC for Carter & Reagan extremely well and has been a man of immense common sense and integrity through his 40+ years in the arena. His analysis of the collapse of oversight in the financial sector from 1998-2008 is very on the mark and coincides with my own despair at the time. His criticism of the actions of Treasury Secretary Paulson and NY Fed Governor Geithner during the 2008-9 panic amplify the misgivings I had at the time. Would his plan for stopping the Panic in 2008 have worked? It's tough to say, things were pretty far gone by then. It is clear that his criticism of Paulson's actions as good only for Wall Street and terrible for the country have been amply borne out over the last 15 years.

I made a fortune out of this catastrophe, but it shouldn't have happened. And I was told I was a fool by the Treasury undersecretary that I rebuked for not doing her job. Apparently, Isaac is a fool too, but at least he's an honest one.

[Levi W. · Rating 3 out of 5]

This book has taught me about the factors and effects of the 2008 economic meltdown and how to anticipate and cope with possible situations that could lead to a similar crisis. It is a comforting read for anyone who worries about what lies ahead in the short or long term. The main aim of this book is to create clarity in confusion.

[Richard Donovan · Rating 4 out of 5]

Very dry topic, but extremely informative about the causes of the 2008 crash.

[Chris Aylott · Rating 3 out of 5]

A former chairman of the FDIC explains the causes of the panic of 2008, in terms that a layman can almost understand. If I have it right, there were some very bad regulatory decisions made after the S&L crisis of the eighties, most of which created positive feedback cycles when the economy went south.

(Example: mark-to-market accounting, which connected bank assets to the financial markets, causing the assets to shrink when the markets dipped, restricting bank lending and further constricting the markets.)

Isaac has nothing but scorn for the inconsistent way the financial crisis was handled in the fall of 2008, but his strongest point is that a strong regulatory system should be in place before anything goes wrong. "Effective bank supervision is always countercyclical," he writes, "and good bank regulators always lean against the prevailing wind." This means pushing banks to save money and reduce risk in good times, and then encouraging them to use those reserves and increase lending when the economy slows down. Makes a lot of sense to me.