Econintersect: Friday July 8 was Sheila Bair’s last day as chair of the FDIC (Federal Deposit Insurance Corporation). She had served under two presidents after being nominated by George W. Bush in 2006. This post was long considered a relative unimportant one, but that all changed in 2008 as the financial crisis struck. Suddenly the FDIC was faced with bank failures much larger than it had the capacity to handle. Bank failures such as Wachovia and Washington Mutual were moved “off the books” at the FDIC and were taken over and merged into other banks – Wells Fargo (NYSE:WFC) and JP Morgan Chase (NYSE:JPM) – under the auspices of government as the Bush administration served out its final days.Bair is widely applauded for how she navigated the FDIC through the financial crisis maze and for how she has strengthened to role of the FDIC in being able to take a larger role in the event of future mega-size bank failures. Her political skills have been contrasted with those of Brooksley Born, who was steam rolled by the troicha of Greenspan, Rubin and Summers when she tried to introduce some sanity into the rush to deregulate derivatives a decade earlier.
That is not to say that Bair was one who “played nice.” As Joe Nocera describes in a lengthy Op Ed in The New York Times:
…she never really got her due. The rap on her was always that she was “difficult” and “not a team player.” There were times, in Congressional testimony, when she disagreed with her fellow regulators even though they were sitting right next to her. Her policy disputes with other regulators were legion; in leaked accounts, Bair was invariably portrayed as the problem. In “Too Big to Fail,” for instance, the behind-the-scenes account of the financial crisis by the New York Times business columnist Andrew Ross Sorkin, Bair is described as one of Geithner’s “least favorite people in government.” As Paulson, Geithner and the Federal Reserve chairman, Ben Bernanke, raced to bail out banks and companies like A.I.G., Bair resisted, fearing that they were being overly generous by putting the interests of bondholders over those of taxpayers.
The many key roles Bair played in her five tumultuous years are covered in detail in the excellent NYT column by Nocera.
The FDIC’s vice chairman Martin Gruenberg was nominated in June by President Obama to succeed Bair. He will become acting chairman on Monday, pending Senate approval of the full appointment.