Former FDIC head William Isaac recently said that the financial system is better off now than it was a few years ago but warned that massive regulatory reform could send the economy back into recession.
"The regulatory requirement has just made life miserable for the smaller banks," Isaac said, according to GovInfoSecurity.com.
In an interview with BankInfoSecurity, Isaac said that the government had no business setting interchange fees and called the Durbin Amendment “pure and simple, special-interest politics.”
“It would be one thing if the savings were going to the consumers, but it is clearly not,” Isaac said, GovInfoSecurity.com reports. “The retailers who are the ones who promoted this Durbin Amendment are keeping the money.”
When asked about the Dodd-Frank Act, Isaac said it was the worst piece of legislation in modern history.
“It didn't address the causes of the current crisis,” Isaac said, according to GovInfoSecurity.com. “It wouldn't have prevented it, and it won't prevent the next crisis. In fact, it's making the next crisis more difficult to deal with because it has tied the Fed's hands and the FDIC's hands in dealing with the crisis.”
Isaac said that the new Financial Stability Oversight Council created by Dodd-Frank had the potential to be effective. Since it is being run by the very agencies it is supposed to be second guessing, such as the Treasury, the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency and the Securities and Exchange Commission, however, there is a significant lack of checks and balances.
“Those agencies are not going to second-guess themselves, and they are not going to think they are doing anything wrong because they wouldn't be doing it if they thought they were doing something wrong,” Isaac said, GovInfoSecurity.com reports.