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00:00And I do want to go back to the 1980s, and I know this isn't a direct parallel here, but you were basically at the FDIC, I believe, and correct me if I'm wrong. What then was the biggest bank failure ever? A bank ISE out of Chicago, Continental Illinois National Bank. It was a bank that, of course, a failure, I should say, that led to a lot of the rules that we have now when it comes to insuring depositors and more importantly, how you reshape the FDIC. Why are we now talking about an SVP or another company like God don't I'll say our signature bank today. It's strange and actually disappointing that we are talking about these things now. But this is this is a relic from the past. When I first went to the FDIC was President Carter appointed me in nineteen seventy eight. And there was a bank in Pennsylvania called First Pennsylvania Bank for the largest bank in Pennsylvania and considered a very good bank. And and the oldest national bank in the nation. It got in trouble because it did exactly what we did, which is it is loaded up on on U.S. treasuries. Just gobble them up and put them on the balance sheet. Made a big bet that interest rates were not going to go up and a foolish bet and they lost it. Paul Volcker became chairman of the Fed in 1979, started raising rates very high to try to calm inflation. And he said he stuck to it. I'm Paul Volcker is one of my heroes. I closing my lot of years and he took our inflation down from sky high oil, 13 percent down to around zero eventually. And he did it by raising the prime rate from fly in free sub prime rate. The prime rate went up soar to 21 and a half percent from about 8 percent. So it was tough medicine. He stuck with it and he made it work. Well, what do you think about it anyway? What are you going to say? Well, first, Pennsylvania, is it? It's got in big trouble. And because it made a big bet on interest rates not going up and they went up a lot and the bank essentially failed. We rescued it and we put it out of its misery and and changed its management and its board. And so for us, initial no longer with us. But why would why would a bank like SBB make that kind of big bet again on interest rates? Exactly. What First Pennsylvania did and why would we treated kindly? I don't understand. Well, that's what I'm curious about here, too. And some of their unfairness. I mean, some of them the securities they had still aren't necessarily super long data. I mean, we're talking about three years out here. And I'm curious as if you can figure out any reason here why in the face of a year long rate hiking effort by the Fed that we maybe didn't see a little bit shorter duration in some of those and some of what was in that portfolio I can argue with. I think they made a bet. It was. It was. I don't know why they did it. I would I'd say it's foolish, but I don't I don't know how you could be so foolish as to make that kind of thing. Well, now we're looking at investors scouring the market, right, that other banks have put themselves in a similar position. Bank is all about confidence. The FDIC, the Fed Treasury are taking steps to make depositors whole at those banks affected. But if you look at CAC, the ETF that tracks retail banks, it is still down 11 percent or so. What needs to happen, Bill, to restore investor confidence in regional banks right now? Well, first of all, I would I would say I'm not generally worried about banks. Most banks are sound and they've been doing things the right way. And the regulators, I think curb for the most part have been on the ball on doing things right. I think there there are institutions that have been aberrations and there are three of them that have occurred in the last couple weeks. And and that's of concern. But but I don't I don't I don't get concerned about the whole system because of that. And I wonder whether this reaction. And I can't I can't criticize them for for deciding to bail out all the depositors, but because I've done that myself at the FDIC. But but I think that I really, really wonder whether we would if there was something that we might have done that was less dramatic and and less less of a bailout to things like this that we do. Pardon. Do you think what we're seeing right now is a bailout? Well, clearly it is. I mean, you said it's not a it's not a bailout of the shareholders are getting wiped out. that's great. They should be in the management or the directors are losing their jobs. That's fine. That's what should be. It basically did what we did was. Illinois back in 1984. And I can hardly criticize somebody for doing that. I do wonder whether it's appropriate in the circumstances to go that far. But you know that Dow Jones that second guessing, I'm not going to do that. But I do think that we shouldn't overreact to all this ISE people. You know, the public needs to become the regulators will take care of this. My worry is not that we're not going to take that. We're not going to take care of it enough. We're going to. You're not going to calm things down enough. I worry that we're going to we're going to do too much to protect too many people that it shouldn't be projected.

Former FDIC Chair Isaac: This Is a Bailout

Former FDIC Chair William Isaac says the government is bailing out banks SVB and Signature Bank. He says he is not worried about the banking sector. He speaks on "Bloomberg Markets." (Source: Bloomberg)