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Senseless Panic: How Washington Failed America Hardcover – June 1, 2010
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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 Panic: 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, Isaac:
- Details the mistakes that led to the panic of 2008 and 2009
- Demystifies the conditions America faced in 2008, and
- Provides a roadmap for avoiding similar shutdowns and panics in the future
Senseless Panicis 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.
Amazon Exclusive: Review fom Professor Cornelius Hurley
Executive Director, Morin Center for Banking & Financial Law
Former Assistant General Counsel, Federal Reserve Board
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In the forward of Senseless Panic, learn about the role the FDIC has played since the Great Depression [PDF].
Top Customer Reviews
The chief value of this book is the insights it provides about how Isaac's thinking and the thinking at the FDIC developed in the early '80s to respond to a series of institution failures in a coherent and responsible manner. Isaac took some brave stands at FDIC that served the taxpayers well.
Some of his more general observations about the recent financial crisis are also interesting and valid (IMHO) up to a point. However, the book suffers from Isaac's bank-centric and FDIC-centric perspective. It's an example of how, when the only tool you have is a hammer, all problems look like nails. He asserts repeatedly that the recent crisis would have been resolved more easily had only government leaders acted as the FDIC acted in the mid-80s.
Unfortunately, the recent crisis was qualitatively different than the bank and S&L crises of the '80s, though, to be sure, some aspects of it repeat the history of the '80s (and of 1998, the '30s, 1907, etc.).Read more ›
What happened that stopped the meltdown in its tracks and prevented Depression II ? Policymakers will tell you it's the extrodinary measures that they took. And while they may have bought time, the financial markets didn't turn until Congress put a gun to FASBs' ( the board that determines accounting standards )head and demanded they back off mark to market accounting standards imposed in 2007 which had beend suspended since 1938 ( helping end the Great Depression ).
What's wrong with transparency ? Nothing. But imagine being forced to sell your house on Galveston isle AS a hurricane is headed your way. And you have only 24 hours to do it. Is that the fair value of that house ?
Isaac relentlessly hammered Congress and the regulators to bring common sense to the bank accounting standards before it was too late. And they did ( March 2009 ). What followed was one of the biggest market meltups since the 1930s. This allowed markets to become liquid again and banks to begin the process of rebuilding their capital structure.
End result. For now the markets are mending. Altho the final page has not been written. Isaac helped save the hour and gave our capitalist system the chance for another day.
Second, I wanted to hear it from Bill Isaac himself, and here's why.
"Senseless Panic" describes, as an introduction to a discussion of their current relevance, various upheavals of the 80's; the mammoth thrift problem, the disaster in the oil patch, the collapse of a major banking chain in Tennessee and Kentucky, the failure of the quite large Continental Illinois Bank, and others. Bill Isaac served FDIC as Chairman during this period. Those knowledgeable of the challenges that all of those events brought to FDIC and the banking industry and the public are well aware (and history undoubtedly will underestimate) how fortuitous was the intersection of Bill Isaac's FDIC tenure and all the aforementioned events.
Serving as Chairman Isaac's Director of Bank Supervision during this era, I quickly grew to appreciate his thoughtful and proactive approach to problem solving.Read more ›
Most Recent Customer Reviews
Does a great job of saying how simple the "bail out" could have been. Could have been more specific as to the Fannie and Freddie problem (and solution). Read morePublished on March 20, 2014 by Michael Eagle It
Bill Isaac brilliantly explains why poor and pro-cyclical regulatory decisions exacerbated a bad situation in 2008. Read morePublished on June 12, 2013 by Fred Fraenkel
I have found William Isaac's book, Senseless Panic, to be useful, instructive, and a timely read. His experience as chairman of the FDIC during a very turbulent period in our... Read morePublished on November 13, 2012 by Bill Thomas
Bill Isaac (with the assistance of Phil Meyer)has made a signal contribution to the literature attempting to make sense out of the financial events that occurred in the latter... Read morePublished on August 17, 2012 by Tidewater
I am thoroughly enjoying this book. I might be a nerd about how the inner workings and decisions that effect the very stability of our financial system take place, but I have to... Read morePublished on March 26, 2012 by Bruce Weide
Mr. Isaac's book, "Senseless Panic", is not only an engaging read but quite instructive. It informs. But unlike most books of this type, Mr. Isaac is not an armchair quarterback. Read morePublished on February 25, 2011 by m hurwitz