Ex Head of FDIC Opines that TARP Worsened the Foreclosure Situation

Ex Head of FDIC Opines that TARP Worsened the Foreclosure Situation

Bill Isaac, the ex head of FDIC opined that TARP had worsened the foreclosure situation. When it came to his ears that the raging financial crisis was the worst catastrophe since the time of the Great Depression he strongly begged to differ. During the 80s he was the chairperson of Federal Deposit Insurance Corporation. At that time he had viewed the scenario as being far worse there were 3,000 thrift and bank collapses and the hitting of double digits by uncontrolled inflation.

President Jimmy Carter had appointed Isaac and he was again appointed by President Ronald Reagan to continue holding the post during the time of the loan and savings crisis that USA passed through. Currently Isaac, now based in Washington, is engaged as a consultant in matters related to financial industry. Speaking as the chairperson of Global Financing Services of a consulting firm named LECG at Rotary Club, Atlanta he said, "We got through it."

Isaac is of the view that the troubles dogging banks currently could have been much milder if the government had not responded in the way it did. This interference accelerated the crisis hysteria by making frequent public statements and announcing policies that were inconsistent with each other.

Isaac specifically attacked TARP ripping it apart for allowing the purchase of nearly $700 billion in mortgages and other soured loans. He insisted, "I still believe it was a horribly bad idea." He was critical of the inconsistent handling of the financial bodies that were in trouble. He said, "We handled one transaction after another in an ad hoc fashion without giving people any sense that anybody was in charge and knew what they were doing."

Some of the banks were saved while some others were neglected and allowed to fall he observed. In a time of crisis the key is to maintain confidence. He said that the actions of the government at that time further destabilized the situation. Isaac put the blame on the use of an accounting rule that was introduced in 2007 that measured the prevailing value of assets. He also was critical of the destruction of $500 billion as capital that was equivalent to $5 trillion in lending potential.

He said that all those dollars "went down the tubes needlessly." He presented his arguments favouring accounting that can measure the worth of assets based on the real and estimated flow of cash. He also said that it was pointless to concentrate on lopsided compensation of the executives and the part they played in the financial catastrophe. Isaac quipped that blaming greed for the failure of a bank "is like blaming gravity for the crash of a plane."

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