When the history of the American financial system’s near-death experience in 2008 is written, FDIC chairwoman Sheila Bair, who officially announced her July 8 departure yesterday, will feature prominently.
She was a key agoniste with then-Treasury Secretary Hank Paulson and his successor, then-NY Fed Chairman Tim Geithner, at the height of the crisis, arguing that the U.S. government had to commit in writing to further funding the FDIC’s guarantees of Americans’ bank accounts in exchange for FDIC’s aid bailing out bigger institutions. She also shaped key legislative and regulatory responses to the crisis, expanding the FDIC’s powers to include the power to resolve large non-bank firms, the effects of which may only be known when we face the next major financial crisis.
I wrote a profile of the solidly centrist Republican in Oct. 2008, and my colleague, Michael Scherer, looked at the three powerful female regulators–Bair, SEC chair Mary Shapiro and Consumer Financial Protection Bureau architect Elizabeth Warren–and their experiences in what had traditionally been a man’s world. What one sees in Bair is a blunt, grounded regulator, committed to the idea of government oversight of the financial system and dedicated to protecting Americans from the more carnivorous, myopic or socially destructive elements of the free market. Her critics, including Treasury and Federal Reserve officials scrambling to contain the crisis at its peak, saw her as narrowly protecting her territorial responsibility at a time when all-hands efforts were needed.
And Bair did go to great lengths during the crisis to preserve American faith in the FDIC’s guarantees of American’s savings, not just by fighting internally, but by appearing everywhere on TV and in person to reassure people their money was safe. In the end, though, Bair may be remembered as much for what she did before the crisis as during it. Seeing the danger of a mortgage meltdown when she first arrived at the FDIC late in the George W. Bush presidency, she took the money-mad attendees of an Oct. 2007 mortgage securities conference to task, effectively standing athwart the out-of-control lending boom shouting “Stop”–only to be attacked and ignored by the industry that would soon nearly destroy the country.
In that I find her a reassuring figure–one of many disciplined, non-partisan public servants who try to foresee dangers to average Americans and protect their interests in times of crisis. At a moment when many powerful and wealthy people are trying to convince Americans that all government employees are shiftless, corrupt and a threat to American values, Bair’s early willingness to speak out and her later efforts to reassure savers, mean her greatest legacy will be preserving some measure of trust in government.