Chairman of Fifth Third sounds alarm on inflation

William Isaac, a Bryan native and chairman of Fifth Third Bancorp, says the country's fiscal problems could lead to inflation. He says he's uncertain what it will take to resolve a looming fiscal crisis.

Government regulators are so focused on creating jobs to restore the economy that they may be oblivious to a potential return of inflation, a former top federal official and the current chairman of Fifth Third Bancorp said Wednesday in Toledo.

William Isaac, a Bryan native and chairman of the Federal Deposit Insurance Corp. from 1981 to 1985, said conditions today are similar to the 1970s when the country headed into a period of double-digit inflation.

While efforts are geared to prevent a double-dip recession, it's possible the country could end up with that, plus inflation, he said.

In the 1970s, the country had "irresponsible fiscal polices," accommodative monetary polices, and increasing agricultural exports -- all of which exist today, Mr. Isaac said.

He was in Toledo to discuss America's financial crisis during a public business forum at the Toledo Club downtown and he is to speak at an event in Bryan Friday.

"The only thing holding us back right now, a little bit, is the fact that there are a lot of people out of work.

And people are scared, so there's not as much spending and investment going on right now," he said.

"I don't know how much longer we can keep inflation under control in light of the fiscal policies we are pursuing."

The head of Fifth Third said he is uncertain what it will take to get elected officials to resolve a looming fiscal crisis "with a growing $14 trillion debt and no end in sight."

The government's handling of the 2008 financial crisis and the resulting $700 billion Troubled Asset Relief Plan did not inspire a lot of confidence, Mr. Isaac noted.

"It was a horribly bad thing and we're going to pay the price for years to come," he said.

"The banks are paying a huge price politically."

He called the bailout program as structured unnecessary, though he conceded some banks needed money. His borrowed $3.4 billion, and repaid it this year.

Fifth Third, like other banks, had bad loan problems and had to increase its write-offs.

Now its capitalization level and its reserves for loan losses are strong, he said.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.