The ContrarianSheila Bair and the White House financial debate.
Last month, Sheila Bair, the head of the Federal Deposit Insurance Corporation, received a Profile in Courage Award at the Kennedy Library, in Boston. Each year, the Kennedy Library Foundation presents the award to public officials who it feels have exhibited political bravery. Bair was recognized for her early, though ultimately futile, attempt to get the Bush Administration to address the subprime-mortgage crisis before it became a threat to the entire economy. One of her fellow-recipients was Brooksley Born, a former Clinton Administration official who had tried, unsuccessfully, to persuade her colleagues to regulate derivatives such as credit-default swaps.
As they waited for a satellite interview with Matt Lauer, of the “Today” show, to begin, Bair and Born sat on either side of Caroline Kennedy in front of one of the library’s exhibits, a replica of the Oval Office as it appeared in 1963.
The regulators couldn’t compete with Kennedy. When the interview began, Lauer asked Bair and Born a perfunctory question about their roles in anticipating the financial crisis, then turned to Kennedy to ask about tabloid rumors that her children had begged her to quit New York’s Senate-appointee contest, because it was “beneath” her. Bair and Born sat uncomfortably as Kennedy batted away the questions. “I’m so glad that you asked about that,” she said, ending the interview. Off camera, Bair gave her a pat on the back. “You handled that well,” she said, and the three women laughed.
It’s too bad that Lauer didn’t take the time to tell his viewers a little more about Bair. She is an unusual figure in Barack Obama’s Washington. Although she has no formal training as an economist, she has worked on and off as a financial regulator in Washington for nearly two decades. In 2006, George W. Bush appointed her to run the F.D.I.C., the agency that, established during the Depression, insures bank deposits. The position has a five-year term and is usually held by an anonymous bureaucrat, but Bair has forced her way to the center of the debate over the financial crisis. Advisers with ties to New York banks have dominated both the Bush Administration and the Obama Administration, and Bair has consistently stood out for her skepticism of Wall Street and for her eagerness to confront the big banks. A Kansas Republican, she has become an unlikely hero to economic liberals, who see her as the counterweight to the more Wall Street-centric view often ascribed to Timothy Geithner, the Treasury Secretary.
Since last fall, when Geithner was the president of the Federal Reserve Bank of New York, he and Bair have been debating about how to deal with the teetering firms that are “too big to fail”—in particular, Citigroup
. This spring, Bair pressed for more structural changes at the company, which has received forty-five billion dollars in government aid, reportedly suggesting, among other things, that senior management, including the C.E.O., Vikram Pandit, should be replaced. And she has quietly urged President Obama to toughen his position on regulation. She lost that fight this month, when the Administration released its regulatory-reform plan, opting for a more risk-averse and bank-friendly approach of more closely monitoring the activities of the largest firms. But, unlike other Obama officials, who are known for stepping in line once the President has made a decision, Bair has shown that she is willing to take her fights public.( Collapse )