An old hand at bailouts steps up to plate
Wake up and good morning. Talk about old home week, and reviving some (good) old ideas. The Wall Street Journal profiles Bill Isaac, who was in charge of the Federal Deposit Insurance Corp. back in the 1980s when banks and S&Ls were falling faster than dominoes. The story credits Isaac for (1) influencing the congressional votes against the original $700-billion bailout package and (2) injecting some alternative strategies in dealing with our current financial fiasco. Isaac penned a Washington Post column on Saturday questioning the administration's proposal.
Of course, the FDIC is back in the news again because new proposals would raise to $250,000 from $100,000 the current cap on federal insurance on bank deposits. Isaac, now a 64-year-old resident of Sarasota and chairman of the Secura Group consulting firm, suggests reviving an FDIC program of issuing promissory notes to troubled banks to buoy their capital bases and start lending again. He's also proposes easing an accounting requirement known as the "mark-to-market rule," which requires firms to declare values on mortgage-security holdings that reflect their short-term worth. In the current environment, that rule effectively forces firms to value their assets at "unrealistic, fire-sale" levels.
I got to know Isaac pretty well back in the '80s when I was covering the savings and loan meltdown in Washington. Isaac ran the FDIC. I still recall being in his office and noting his anger and frustration when he learned the regulator of national banks, the Comptroller of the Currency, had taken action on his own to handle the struggling Continental Illinois National Bank. It all had a seat-of-the-pants feel to handling a banking industry emergency at the time. Kind of like now ...
As for Isaac, he says he returned to Washington reluctantly on Sunday because he had planned to take his two children to see the Tampa Bay Buccaneers play (and beat, 30-21) the Green Bay Packers.
On a related economic challenge: Are we really headed for a U.S. unemployment north of 7 percent? Some economists, such as those from Mission Residential, Moody's Economy.com and Global Insight, predict it will top 7 percent some time next year. The government is expected to report Friday that employers cut jobs in September for the ninth straight month. Last month, the unemployment rate jumped from 5.7 percent to 6.1 percent -- nationally -- the highest in nearly five years. How high can we go?
In Florida and the Tampa Bay area, 7 percent is right around the corner. Bureau of Labor Statistics data show the Tampa Bay metro area saw its unemployment rate increase to 6.9 percent in August from 6.7 percent in July, while statewide Florida is right behind at 6.8 percent in August up from 6.5 percent in July.
Somehow, Tampa Bay's taking it on the chin in job losses lately. More than many other Florida metro areas given our size. Consider: Our metro area unemployment rate is higher than that of Miami-Fort Lauderdale, Orlando and Jacksonville. Still, it is lower than such smaller areas as the east coast's Sebastian-Vero Beach and Palm Coast (both over 10 percent), or Punta Gorda and Port St. Lucie (both 9.2 percent) or Cape Coral-Fort Myers (9 percent). But look at it this way. Tampa Bay lost 21,800 jobs, or more than one-fifth, of the 98,700 jobs lost statewide in the past year. Only Miami-Fort Lauderdale lost more (23,400, though that's a bigger metro area) while Orlando gained 1,400 jobs, says BLS.
Speaking of competing metro areas, Major League Baseball's postseason begins this week without the New York Yankees, a big-market October fixture for 13 straight years. But, as the SportsBusiness Journal notes, even without the Yankees in the playoff mix, sponsor activation and advertiser spending around the postseason remains at historically high levels. I mean, after all, look at all the big metro areas represented in the playoffs: Los Angeles, Chicago, Philadelphia, Boston. As an unabashed hometown Rays fan, here's my favorite quote from MLB President Bob DuPuy:
“You look at the kind of geographic spread we have, and we’re in a very strong position. There’s a good mix between some of the more historic franchises and the newer stories like Tampa. We’re very bullish on our prospects.”
You got that right, Bob. Go Rays!
-- Robert Trigaux, Times Business Columnist