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

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