Former FDIC chief warns of bubble

Don't ask William Isaac for investment advice because he doesn't have any right now.

The former chairman of the Federal Deposit Insurance Corp. and Chairman of Fifth Third Bank told a gathering of the Speaker's Assembly of Southwest Florida in Bonita Springs recently that he views the stock market currently as a bubble and real estate headed in that direction.

“I've never seen a more difficult environment to make decisions,” says Isaac, who recently turned 70. “I have most of it on the sidelines because I'm afraid to lose it.”

Isaac says the Federal Reserve is driving the economy now with its massive injection of liquidity known as “quantitative easing,” creating massive risk if things go wrong. “If it were a bank, it would be shut down and the people running it put in jail,” he told the group.

“The Fed says the economy stinks,” Isaac says, citing the central bank's plans to keep interest rates near zero for the foreseeable future. “What incentive do I have to go out and invest?”