William Isaac, former chairman of the Federal Deposit Insurance Corporation, predicted Wednesday that more banks will fail after the collapse of Silicon Valley Bank and Signature Bank.
Speaking on Fox News, Isaac said the government’s “out-of-control” fiscal policies will cause more banks to fail.
“I do think there’s probably going to be more failures along the way,” Isaac, who served in the Raegan administration, told host Neil Cavuto.
“The problem we have is the same one that we had back in 1970s when the government was out of control with its fiscal policies, its monetary policies, inflation set in and banks were just not ready for that,” he explained. “We wound up losing some 5,000 banks and thrifts during that period.”
Fortunately, Isaac said the economic pinch will not trigger as many failures this time around — but only because there are fewer today that can fail.
“We won’t lose anywhere near that number this time because we don’t have that many,” he said. “We only have about 4,500 banks today. I’m not concerned a lot about contagion. I believe the government knows what it’s doing. It’s willing to take actions. It knows how to take those actions. I don’t think this is the last of the failures. I think we’ve got some cleanup to do.
“Most importantly: The government’s got to get its act under control,” Isaac added. “The government has had irresponsible fiscal policies for 20 years and pretty irresponsible Fed policy.”
Of course, Isaac said the government can mitigate damages if it reverses irresponsible policies.
Meanwhile, while the government refuses to say it has promised a bailout despite saying the deposits at SVB and Signature Bank are guaranteed beyond the FDIC’s $250,000 maximum, Isaac believes the government is “clearly” promising a bailout.
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