The financial regulation bill agreed upon by Congressional leaders overnight is too weak and will not reform the system, William Isaac, former chairman of the FDIC, told CNBC.
"The bill clearly would not have prevented the crisis of 2008 and will not prevent the next crisis," said Isaac, who headed the FDIC during the banking crisis of the 1980s, under Presidents Carter and Reagan.
Even before the legislative deal was struck in the pre-dawn hours Friday, Isaac was skeptical about the potential impact of the bill and pessimistic about its ability to provide significant solutions.
"In fact, to the extent the bill hinders the crisis management powers of the Fed and FDIC, it will exacerbate the next crisis and almost ensure that taxpayer funds will be required to get the crisis under control," he added.
"All in all, the bill does not reform a badly broken regulatory system, which is the bill's signal failure," said Isaac, currently the chairman of LECG's global financial services.
Isaac also said, "I believe the bill is likely going to go from bad to worse from the perspective of regulatory reform, as the chances are good that they will weaken the Volcker Rule and the regulation of derivatives."