US banking authorities must impose enhanced market discipline on larger banks
William Isaac, former chairman of FDIC discusses how US financial regulators failed to perform the very roles they were created for in recent times. April 23, 2013 | Foo Boon PingChairman of the Federal Deposit Insurance Corporation (FDIC) in the 1980s, William Issac presided over one of the worst banking system meltdowns in the history of the US. He believes that the conditions were much worse in that crisis than in 2008, yet there was less damage to the banking system and economy then. In a wide-ranging interview with The Asian Banker, Isaac offered up what he sees as a misdiagnosis of the cause of the crisis and puts the blame squarely on regulators that had failed to perform the very roles that they were created to perform. He believes that the regulatory system has become too complex and politicised. Dodd-Frank Act did not address the causes of previous banking crisis “Dodd-Frank is the worst piece of financial legislation that I have witnessed in my life. It purports to address the causes of the US banking crisis when it in fact addresses very few of them. If Dodd-Frank had been law 15 years ago, it would still not have prevented the crisis and it will not prevent the next crisis,” he charged. The causes of the crisis were many, including Fannie Mae and Freddie Mac, the two government agencies set up to promote housing. They were run in a reckless fashion without proper underwriting standards. “We have a banking regulatory system that has way too many regulators, is overly complex, fragmented and highly politicised. The White House got involved in stress tests, for example. That would have been unheard of when Paul Volcker was chairman of the Fed and I was chairman of FDIC.... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Regulation, Risk and Regulationriskregulation,Risk and Regulation, Regulation,Risk and Regulation, Keywords:William Isaac, FDIC, Dodd-Frank Act, TARP, Systemic Risk William Isaac, FDIC, Dodd-Frank Act, TARP, Systemic Risk
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