Senseless Panic: How Washington Failed America - Political Analysis Book on US Government Failures | Perfect for History Buffs & Political Science Students

A Review of Senseless Panic: How Washington Failed America by William M. Isaac with a foreword by Paul VolckerBy Pat Choate_________________________The old saying about the Bourbon rulers of France is that they were men who never forgot and never learned.We can say the same of those who design and administration the regulation of America's financial sector. The U.S. government has had to bail out out all or parts of that system nine times since the early 1980s. After each crisis, some laws and regulations are changed, but then another crash happens. The latest of which (2007-2009) nearly collapsed the global financial system and has led to a doubling of unemployment, and cost Americans the loss of their homes, pay cuts and the thrashing of their savings and pensions.How is that our leaders in Washington and Wall Street continue to blindly make the same mistakes time and again and fail to correct the structural flaws that lead to these financial collapses? Perhaps more important, why is it that the same people who make these same mistakes in both the public and private sectors are never held accountable and continue in their powerful, extraordinarily well-paid positions?Finally and certainly most important, what could be done to greatly reduce the risks of future financial collapses and force our financial system to serve the interests of the broader economy rather than acting as a casino using the collected savings and capital of the nation in one failed gamble after another.Senseless Panic: How Washington Failed America by William M. Isaac with a foreword by Paul Volcker answers those questions.Mr. Isaac headed the Federal Deposit Insurance Corporation during the Administrations of President Jimmy Carter and Ronald Reagan. In that position, he had to deal with cleaning up the messes caused by the Savings Bank and S&L Crisis of the 1980s, the Penn Square bank failure in Oklahoma, the Butcher banking empire crash in Tennessee the collapse of the Continental Illinois Bank in Chicago, and dozens more.As head of FDIC, Mr. Isaac handed more than 3,000 bank and thrift failures, which represented $100 billion of insolvency reconciled at a total cost of $2 billion, none of which was taxpayer money.Without question, William Isaac is the world's leading expert on how to handle major financial collapses. Logically, he should have been one of the first persons that President George W. Bush and Treasury Secretary Henry Paulson asked for advice. If they had, they could have solved that financial crisis without a massive bailout, without crushing the economy and without throwing millions of people out of their homes and out of their jobs.Dozens of Members of Congress did remember Mr. Isaac and they asked him to come to Washington and advise them on what to do. "Reject the TARP," the Bush Administration's $700 billion bailout, and use other cost-free techniques was the core of his advice. Moreover, in a great surprise to the authorities in Washington and Wall Street, a majority in the House of Representatives followed that wisdom and rejected the Administration's TARP bill on its first pass through that body.A President and Treasury Secretary in panic added $100 of pork projects to the original bill and ran it through the Senate again and then secured a majority vote in the House of Representatives. Mr. Isaac was there, on the inside, and his narrative of what happened makes a story worthy of a movie.In the earlier part of his book, William Isaac recounts the history of the financial collapses that led to the debacle of 2007-2009 and then offers solutions to the lessons our leaders should have learned, but did not.I suspect that one of the reasons that Bill Isaac's advice was rejected by the Bush Administration is that so many of those in positions of power were so personally and financially connected to Wall Street. Had Isaac's solutions been adopted, they would have led to shareholders losing their equity because of the bad mistakes made by their management's bad gambles - something known as risk in capitalism. The FDIC would likely have removed those officers and directors from their jobs. The advice was not taken and most remain in place.The supposed "reforms" proposed by the Obama Administration and that Congress is rushing to put into place ignore the lessons of prior failures and the real reforms proposed by Mr. Isaac. A 10th collapse of America's financial system, therefore, is inevitable. So, too, we will bail out institutions, once again, considered too big to fail. The only question about the forthcoming debacle is when, how big and what will be the triggering event.For anyone who wishes to understand how and why Americans have paid such a high price for the greed of Wall Street and the incompetence of Washington, this is the book to read.It is a well-written, jargon free, fast read, and in 190-pages gives the facts and perspectives an informed citizenry needs. I highly recommend Senseless Panic by William M. Isaac._______________________Pat Choate is an economist and author of several books on economics. His most recent is Saving Capitalism (A Vintage Original: New York, 2009).