RETURNED TO BILL ISAAC FORMER CHAIR OF THE FDIC FOR INSIGHTS
ON THIS. THANK YOU FOR JOINING US ON AN
IMPORTANT DAY WHAT DO YOU THINK IS ABOUT TO HAPPEN?
>> I DO NOT KNOW. CLEARLY THEY HAVE TWO CHOICES.
MAYBE MORE THAN TWO. TWO PRIMARY CHOICES.
ONE IS A SELL THE BANK TO SOMEBODY, THERE ARE A NUMBER OF
BANKS THAT PUT MONEY INTO IT AT THE REQUEST OF THE FDIC.
I AM SURE THEY ARE HAVING CONVERSATIONS WITH THEM ON IF
ANY OF THEM OR SOME CONVERSATION -- COMBINATION OF
THEM WOULD LIKE TO ACQUIRE THE OTHER.
THE OTHER IS THE FDIC TO TAKE OVER AND TURN IT INTO AN FDIC
RUN BANK FOR A WHILE. THEN FIGURE OUT AFTER THAT WERE
TO GO. ANNMARIE: WHAT HAPPENS WITH THE
GOVERNMENT? TODAY SAY IT IS A SYSTEMICALLY
IMPORTANT BANK AND THEY CAN GO WIN AND POTENTIALLY MAKE THE
DEPOSITORS HOLDING A POLITICALLY MIGHT BE DIFFICULT.
>> THEY COULD DO THAT A GENETIC IS NECESSARY.
-- THINK IT IS NECESSARY. THIS IS A BANK THE FDIC COULD
BE ABLE TO TAKE OVER WELL. THERE ARE WAYS TO DO WITH THE
DEPOSITORS. WE DID SOME OF THOSE THINGS
WITH THE 1980'S. FOR EXAMPLE IT IS POSSIBLE TAKE
CARE OF THE LARGE DEPOSITORS IN A WAY THAT WE DID IN THE 80'S.
TO DO A PARTIAL PAYOFF OF THOSE DEPOSITORS UP FRONT AND MORE
LATER. I THINK THEY HAVE A LOT OF
TOOLS THEY CAN USE. I THINK WHAT YOU WANT TO DO IN
A BANK FAILURE IS NOT HAVE THE TWO DISRUPTIVE. THEY.
HAVE TO BE MINDFUL OF THAT. TAKING CARE OF THE UNINSURED
DEPOSITORS FOR SURE.
TAKING CARE OF OF THE INSURED DEPOSITORS FOR SURE AND THE
UNINSURED TAKING CARE OF THEM AS BEST AS YOU CAN ABOUT
CAUSING A LOT OF DISRUPTION. TAKING CARE OF HIS IS NOT
LOSING THE BUSINESS ACCOUNTS, THERE ARE THINGS.
I HAVE BEEN WRITING ABOUT SOME THINGS WE NEED TO DO TO IMPROVE
THE DEPOSIT INSURANCE SYSTEM OF THE WAY IT OPERATES.
A LOT OF THESE THINGS THE FDIC CAN DO WITHOUT NEW LEGISLATION.
JOE: WE ARE IN A BIT OF A COLLISION
OF HEADLINES TODAY. THIS NEWS HITS THE SAME DAY THE
FED IS UP WITH THIS REPORT ON THE COLLAPSE OF SVB.
THERE ARE A LOT OF QUESTIONS ABOUT WHAT THE RESPONSE SHOULD
INCLUDE MORE BROADLY FROM WASHINGTON.
CAN YOU SPEAK TO OUR VIEWERS ABOUT THE DIFFERENCES IN THESE
CASES? IT IS PRETTY TOUGH TO CONNECT
THE DOTS BETWEEN SVB AND FIRST REPUBLIC.
IS THIS SOME THAT CALLS FOR A BROADER APPROACH -- APPROACH OR
A PRECISE ONE?
>> EACH BANK IS DIFFERENT. YOU HAVE DIFFERENT ISSUES IF
THE DEAL WITH DEPENDING ON WHAT IS IN THE BANK, WHAT THE
DEPOSITORS ARE IN, HOW MANY UNINSURED THERE ARE, HOW MANY
BUSINESSES. -- BUSINESS ACCOUNTS ARE ARE.
A LOT OF THINGS TO CONSIDER. YOU DO NOT WANT FAILURE
DISRUPTING LOCAL COMMUNITIES. I DO NOT THINK THERE IS
ONE-SIZE-FITS-ALL. I THINK THE FTSE HAS A LOT OF
-- FDIC HAS A LOT OF DISCRETION TO SHAPE DIFFERENT TRANSACTIONS
INTO FOR WAYS. WHO WOULD LIKE TO BUY THIS BACK
IF ANYONE?
IT IS HARD TO SAY THERE IS A STANDARD WAY TO HANDLE A BANK
FAILURE. WHEN I WAS AT THE FDIC WE
HANDLED THOUSANDS OF BANKS AND SNLS THAT FAILED.
A LOT OF THEM ALL OF THE SAME FORMAT AND A LOT OF THEM HAD TO
BE SPECIALLY TAILORED FOR THE THINGS THAT WERE IMPORTANT IN
THAT TRANSACTION TO THE PUBLIC.
>> GIVEN YOU WERE IN THIS POSITION BEFORE CAN YOU GIVE US
AN INSIGHT AND WALK US THROUGH WHAT IS HAPPENING RIGHT NOW?
GIVEN THE FACT THAT WE KNOW WE ARE WAITING FOR THIS MAJOR
ANNOUNCEMENT FROM THE FDIC?
>> I DO NOT KNOW WHAT IS HAPPENING RIGHT NOW.
I KNOW THERE HAS BEEN A LOT OF NEGOTIATION GOING ON AMONG THE
BANKS THAT ARE CONSIDERING HOW THEY MIGHT BE HELPFUL AND THE
FDIC.
I AM SURE THAT IT INVOLVES PEOPLE FROM THE BANK ITSELF.
IF THEY ARE NOT DOING TAKEOVER DEALS, THE FDIC INSTEAD TAKING
OVER A BANK AND PUT INTO A -- TEMPORARILY.
THE FDIC IS VERY BUSY TRYING TO FIGURE HOW TO GET IT ALL DONE.
THEY DO NOT HAVE A LOT OF TIME. THEY NEED TO GET IT DONE OVER
WEEKEND. THE FDIC PROBABLY HAS A LOT OF
PEOPLE IN THERE RIGHT NOW. I WOULD GUESS. JOE:
YOU MENTIONED DEPOSIT INSURANCE, CAN WE PUT A FINER
POINT ON THAT? THAT WAS A BIG DEBATE A COUPLE
WEEKS AGO FOLLOWING THE COLLAPSE OF SVB.
LAWMAKERS THAT OUT TO $50,000 -- THAT THOUGHT THE 202,000
DOLLAR THRESHOLD SHOULD BE INCREASED -- $250,000 THRESHOLD
SHOULD BE INCREASED.
>> I DO NOT BELIEVE IT SHOULD BE INCREASED.
THE PURPOSE OF THE DEPOSIT INSURANCE IS A TAKE CARE OF
SMALLER DEPOSITORS. WE DID NOT HAVE THE
SOPHISTICATION, TIME, KNOWLEDGE TO PROTECT HIMSELF.
I THINK WE CAN EXPECT LARGER DEPOSITORS DO NOT NEED TO BE
PROTECTED AND THAT EXTENT. THEY OUGHT TO BE AT RISK TO
SOME DEGREE, SO WE HAVE SOME MARKETPLACE DISCIPLINE IN THESE
BANKS WHEN THEY TAKEN THESE BIG INVESTORS.
I BELIEVE THE DEPOSIT INSURANCE SYSTEM NEEDS TO BE REFORMED.
IT HAS BEEN A LONGTIME SINCE IT HAS HAD A SIGNIFICANT REFORM.
I DO BELIEVE CHECKING ACCOUNT THEY DO NOT PAY INTEREST NEED
TO PAY -- BE PROTECTED. I WOULD PROTECT THEM ALL THE
WAY. THEY ARE NOT CHASING RATES THEY
ARE NOT CAUSING TROUBLE. THEY ARE BUSINESS ACCOUNTS,
MEETING PAYROLL, ALL SORTS OF THINGS IMPORTANT TO THE LOCAL
ECONOMY. I WOULD PROTECT THOSE FULLY.
I BELIEVE THE $250,000 LIMIT IS FINE FOR SMALLER DEPOSITORS.
LARGER DEPOSITORS WE NEED A PLAN WHERE THEY GET MOST OF
THEIR MONEY RIGHT AWAY, AND THE FDIC, IT WILL BE GIVEN TO THEM
BY THE FED THE FDIC REPAY THE FED.
THE FDIC WILL -- THE ASSETS OF THE FAILED BANK AND REPAY THEM
OF THAT MONEY. ANY EXCESS MONEY OVER THAT WILL
BE GIVEN TO THE LARGER DEPOSITORS THAT TOOK A SLIGHT
HAIRCUT. THINGS LIKE THAT ARE WHAT NEED
TO BE DONE. THE FDIC NEED TO BE A MORE
INDEPENDENT AGENCY THAN IT IS NOW.
WHEN I WAS CHAIRMAN IT WAS VERY INDEPENDENT.
THE FED WAS VERY INDEPENDENT. WE HAVE GONE AWAY FROM THAT.
WE ARE WAY TOO INVOLVED IN BANK FAILURES AND NEED TO HAVE MORE
INDEPENDENCE IN THESE AGENCIES SO THEY CAN DO WE NEED TO BE
DONE WITHOUT REGARD TO CONCERNS ABOUT A FROM A POLITICAL
STANDPOINT.