Oct

5

LectureHop: A Conversation with the Honorable Sheila C. Bair

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#2 never sounded so good

Sheila C. Bair

Yesterday at 6 pm in Low, the Columbia Program for Economic Research hosted the Honorable Sheila C. Bair, Former Chairman of the FDIC from 2006-2011.  Teacher’s pet Alexandra Svokos did her best to be a good econ major.

The Hon. Sheila C. Bair had the honor of being head of the FDIC during the most difficult period of our economic lifetimes, arguably kept Americans from bank runs, and stood strong on her stance that the FDIC would not borrow taxpayer money (“I was darned if I was gonna borrow from taxpayers”).  She was portrayed in the HBO film Too Big To Fail.  She was on the “Time 100” list of most influential people in 2009 and was ranked the second most powerful woman in the world–twice–by Forbes.  In short, Bair is kind of an economic badass.

Opening her talk last night, Bair told the story of doing a talk at her daughter’s all-girls school where the first question she received asked who the first most powerful woman was.  “It’s very hard to impress young people,” she laughed.  Her more difficult goal now, however, is to make economic issues more understandable and important to the public.  Bair explained that she wrote a book, Bull By the Horns, to do just so.  The banks are currently the third least trusted institution in America after HMOs and Congress.  Throughout her talk, she pushed that trust is extremely vital.

Because of the 2008 financial crisis, Bair noted that the public was pissed at financial institutions.  “I don’t blame them,” she said. “I was gamed, too.”  She told some anecdotes proving this.  Before the crisis, she had tried to make tighter regulations on subprime standards but met too many roadblocks.  When she told mortgage bankers that there loans were going bad, they groaned that it wasn’t their fault, it was the lazy borrower’s fault.  They continually referred to borrowers as “those people,” which made Bair even angrier.  Finally, after the  housing bubble burst, Bair was able to tighten the standards, but the damage was already done.  She asked the banks why they funded underqualified borrowers in the first place, to which they responded, to her chagrin, “bad regulations.”

One of her biggest grievances is the amount of lobbyists and political bias in financial institutions.  They contribute to blocking good regulations while helping more selfish legislatures, or lack thereof.  Nonetheless, Bair said, the regulators themselves are not devoid of guilt.  She was extremely disappointed by the convoluted language of Dodd-Frank Act.  She believes it was so complex because they were trying to please so many people in different areas of the industry, rather than do what was right.  There were big delays, it was not strongly implemented, and many facets she disapproved of were included.

As if inspired by the, ah, totally clear stances taken by the candidates at this week’s debate, one audience member asked how she thought the outcome of the election will change things.  First, she said that one of her quasi-jokes is that she wishes Jon Huntsman was still in the running, because he was the only one to bring up specific topics of finance and banking.  Moving on, she said that Obama talks well but his implementation of reforms have not walked the walk.  Moreover, she disapproved of his 2009 continuation of bail-outs.  As for Romney, she is confused.  He said he would immediately repeal Dodd-Frank, but his examples of policies to introduce are actually featured in Dodd-Frank.  Bair thinks it would be better if he worked with the policies in place, rather than trying to implement new ones.

Ultimately, Bair enforced, it is up to the public to see that there is a change in the financial system of the United States.  She pressed that the public needs to be better and more informed.  Finance should not seem like something completely incomprehensible.  After understanding the issues, she went on, the public has to make them major political topics and press politicians for specifics on their stances.  It is only through group action and learning that we can improve the system.

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1 Comment

  1. From at least 2008 forward, thousands of depositors made a request to the FDIC under Sheila Bair's leadership as follows:

    1.formthr FDIC to require that banks tell depositors CLEARLY that accounts are insured under aggregated limits for each category and NOT each account separately. This request - despite a 20+ year history of uninsured depositors, has not happened.

    2. To require that banks implement ALERT technology to immediately notify depositors whenever deposits are uninsured the very same way banks notify borrowers when they fail to pay their mortgages, exceed checking accounts or credit card limits. In other words, the FDIC only requires immediate notification when the lender is the BANK. When a depositor deposits momey, in effect lending money to a bank, that bank is the BORROWER and the depositor the lender. Here, the FDIC not only requires NO immediate notification but actually alleges these alerts cannot be done, all the while collecting premiums on funds they can later declare uninsured.

    This unfortunate equation only alerting when it is in the institution's favor is the Sheila Bair system . . .

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