Friday, March 11, 2011

[Video] Former FDIC Head Bill Isaac Talks about The Dud that Dodd-Frank Is, and the Potential for a Farmland Bubble

Former FDIC Chairman is a person I've been watching on the teletube the past few years and comes across as a very straight shooter.  He has been offering a lot of good ideas on financial reform but it appears the way the lobbyists folks in Congress wrote the Dodd Frank bill, very little of what he proposed was included.  And after all, what does the guy who was the head of the banking system have to offer in the reform dialogue that JPMorgan and Goldman could not?  I always listen to the foxes when getting advice on how to create safeguards around the hen house.

Anyhow we have 2 videos on Yahoo Tech Ticker on how......... (wait for it) Wall Street won again in reform, and the potential for a bubble forming in farmland as QE-infinity runs through the economy.  Stock market 99.... Real estate 2006.... commodities 2011 - notice one institution behind all our bubbles?  Yes the same one that has been handed even more power in Dodd Frank.

As always, these sort of videos are only for informational purposes and nothing in the country will change as the political-corporate/monied elite consolidate control - so don't get your blood pressure up too high after listening.  Better yet, just take the blue pill and this post will go away....

(I) Wall Street Won! Nothing to Prevent Another Crisis, Says Former FDIC Chair Bill Isaac

  • Crisis may create opportunity, but Congress completely flubbed its opportunity to enact meaningful financial reform in the aftermath of the worst crisis since the Great Depression, says the former chairman of the FDIC, Bill Isaac.
  • The Dodd-Frank reform bill--the one major piece of legislation to emerge since the financial crisis--is mostly meaningless, says Isaac, who is also the chairman of regional bank Fifth Third.  Dodd-Frank does nothing to address the root causes of the financial crisis, Isaac says, and it won't prevent the next one.
  • Specifically, Dodd-Frank will just create more bureaucracy and red tape. Meanwhile, our biggest banks are still "Too Big To Fail." Our commercial banks are still allowed to take way too much risk. Our regulators are still balkanized and political. And we still haven't addressed Fannie Mae and Freddie Mac.
  • Isaac suggests the sure may be to re-implement the Glass-Steagall Act which separated commercial and investment banking. But, at this stage of the game, that's not likely, considering the size and scope of the bank lobby in Washington.
  • In other words, it's fair to say that Wall Street won the financial crisis.  And it's no mystery who lost.

(II) Betting the Farm: Former FDIC Chair Fears Another 'Ag' Bubble Brewing

  • The housing bubble may have burst but another American real estate boom rolls on: Since 2000, U.S. farmland values have risen by 58% after inflation, according to the FDIC. And since 2003, they've risen by over 10% annually
  • Surging agriculture prices, a weak dollar, fear of financial assets and rising global demand for food have all contributed to this boom. The question now is whether it's becoming a bubble.
  • "It's very reminiscent of period we had in 1970s," when farmland prices surged 350% in less than a decade, says Bill Isaac, former FDIC chairman and current chair of Fifth Third Bancorp. "I'm hoping we don't let it get that far."
  • At an FDIC symposium in Washington this week, Isaac discussed the "worrisome trends and similarities between the 1970s and today," including: loose fiscal and monetary policies, massive deficits creating inflation, and a weak dollar spurring demand for agricultural exports.
  • When Paul Volcker became Fed chairman in 1979, he had a mandate to break the back of inflation. In the process, Volcker burst the farm bubble: foreclosures skyrocketed as land prices tumbled and about 300 farm banks failed.  "It was very painful," Isaac recalls. "I hope we don't go through another boom-bust cycle."
  • The FDIC symposium was designed to avoid such an outcome by alerting bankers to the potential risk of their ag-related exposure. Although the 100 largest banks account for about 25% of farm-related loans, Isaac says he's more worried about smaller, less diversified community banks in agricultural producing regions.
  • Suggesting regulators and bankers have learned the lessons of the 1970s farm boom and the more recent residential housing bubble, Isaac is hopeful this cycle will be less painful. That is, "as long as we don't let the bubble get out of hand," he says. "If we let bubble get out of hand, all bets are off. "
  • And as long as Ben Bernanke is at the helm of the Fed, the ‘smart money' is going to keep betting (on) the farm.

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