This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Making Sense of Post-TARP America

NEW YORK ( TheStreet) -- William Isaac was among the many voices heard by members of Congress in the days leading up to the passage of the Troubled Asset Relief Program. In late September 2008, he told legislators that the purchase of $700 billion of toxic assets was a "colossal waste of taxpayer money."

Isaac, the former head of the Federal Deposit Insurance Corporation during the banking crisis of the 1980s, argued there was no need to enact a new law. The FDIC, he said, should just declare a financial emergency and then use its emergency power to purchase capital in banks.

He also told members of Congress that an alternative to the TARP was for the SEC to suspend the mark-to-market accounting rules and to reimpose on short sellers the Depression-era regulations on speculative abuses.

In his new book, Senseless Panic: How Washington Failed America, Isaac takes us back to his pre-TARP journey: How his published comments on the bailout plan served as his ticket to Washington, and how he personally witnessed the plan rejected, amended and then finally approved. He also gives us a peek at a U.S. financial system that could have survived, and perhaps done better, without the TARP.

Since his first TARP-related meeting in 2008, Isaac has been back in Washington several times to discuss financial reform. As we wait for the final version of the bill -- combining the recently passed Senate measure with a version approved by the House in December -- we asked Isaac to share his thoughts on the soon-to-be new financial regulations.

In your book, you wrote that there was no need to enact the TARP law because the FDIC and SEC already had the authority to prevent the "chaos" everyone was suggesting would ensue without a bailout. Do you feel the same way about financial reform? Is it absolutely necessary to change current financial regulations?

The current financial reform bills in the House and Senate would not have prevented the 2008 crisis and will not prevent the next one. In fact, by further politicizing the bank regulatory system and not making meaningful reforms in it, these bills make the next crisis more likely. And by curtailing the ability of the Fed and FDIC to act to stabilize the financial system, the bills make it more likely that the next crisis will spin out of control. As a nation, we would be much better off if these two bills were rejected and Congress were to enact sweeping reforms after the elections in November.

In your book, you offered policy measures for preventing the next financial crisis. Which one of your many recommendations is most crucial?

We need to fix Fannie and Freddie, undertake serious reforms and restructuring of our regulatory system, and we need to get Treasury out of the crisis resolution process.

You have been consulted by members of Congress pre-TARP and post-TARP. Which version of the financial regulatory bill do you feel makes the most sense and why?

Neither the House nor Senate bill is worthy of passage and both will do more harm than good. Any member of Congress who voted for TARP and votes for financial reform along the lines of the bills under consideration should be given his or her walking papers. The current bills are campaign documents, not serious financial reform measures.

-- Written by Marilen Cawad in New York

RELATED STORIES:


Follow TheStreet.com on Twitter and become a fan on Facebook.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $118.44 0.00%
FB $94.14 0.00%
GOOG $631.21 0.00%
TSLA $259.99 0.00%
YHOO $36.69 0.00%

Markets

Chart of I:DJI
DOW 17,598.20 -91.66 -0.52%
S&P 500 2,098.04 -5.80 -0.28%
NASDAQ 5,115.3820 -12.8990 -0.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs