Nearing the conclusion of her tumultuous five-year term, outgoing ""FDIC"":http://www.fdic.gov/ chairman Sheila Bair made moves this week to shape the legacy she leaves behind in July, making the case for sounder policies needed to head off the potential for a replay of the 2008 financial crisis as markets and industries move forward.[IMAGE]
""_Bloomberg News_"":http://www.bloomberg.com/news/ reports that Bair traipsed from congressional hearings to public speaking engagements, testifying before the House Oversight and Government Reform subcommittee on proposed capital standards increases on Wednesday and delivering a speech on the soundness of still-recovering banks at the ""National Press Club"":http://press.org/ on Friday.
Despite glowing praise from Rep. Patrick McHenry (R-North Carolina), Bair offered up some shortcomings in her testimony, citing over 350 ""FDIC"":http://www.fdic.gov/ -insured bank failures during her tenure. She sang a familiar refrain by arguing against the 2008 bailouts and government intervention in general.
├â┬ó├óÔÇÜ┬¼├àÔÇ£Bailouts are inherently unfair,├â┬ó├óÔÇÜ┬¼├é┬Ø she said in her testimony. ├â┬ó├óÔÇÜ┬¼├àÔÇ£They violate the fundamental principles of limited government [and] that├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós why the ""FDIC"":http://www.fdic.gov/ was so determined├â┬ó├óÔÇÜ┬¼├é┬Ø to argue for greater receivership authority and sensible liquidation plans.
Calling a proposed 10 percent capital hike for risk-weighted assets ├â┬ó├óÔÇÜ┬¼├àÔÇ£moderate,├â┬ó├óÔÇÜ┬¼├é┬Ø Bair said in her testimony that federal regulators needed to push for a 3 percent capital surcharge for large banks.
Bair, a registered Republican, also shared her support for the Dodd-Frank Act, praising opportunities for greater oversight and transparency in the mortgage banking industry. Unlike many of her fellow party members, the ""FDIC"":http://www.fdic.gov/ chairman agreed with the controversial Qualified Residential Mortgage rule, which requires banks issuing mortgage-backed securities to retain 5 percent of the risk.
Shifting to another forum, Bair spoke at length against what she called ""short-termism,"" describing the mortgage industry before 2006 as one buoyed by ""badly misaligned economic incentives"" that proved disastrous over the long haul.
She used the speaking opportunity to highlight the ""FDIC's"":http://www.fdic.gov/ role in resolution framework affecting systemically important financial institutions, or banks deemed ""too big to fail,"" and the Dodd-Frank Act -- moves that garnered both praise and criticism for her legacy.
Mark Calabria, director of financial regulation studies at the ""Cato Institute"":http://www.cato.org/, called the legacy that Bair leaves behind ├â┬ó├óÔÇÜ┬¼├àÔÇ£at best a mixed one.""
He criticized Bair for pushing for ├â┬ó├óÔÇÜ┬¼├àÔÇ£a massive expansion├â┬ó├óÔÇÜ┬¼├é┬Ø of ""FDIC├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós"":http://www.fdic.gov/ regulatory authority during the Dodd-Frank Act, saying ├â┬ó├óÔÇÜ┬¼├àÔÇ£the agency has proved itself barely capable of handling the responsibilities it already has.
├â┬ó├óÔÇÜ┬¼├àÔÇ£While she was sometimes the only voice in the room arguing against bailouts, she also oversaw a massive, and in my opinion illegal, bailout of bank creditors via the ""FDIC├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós"":http://www.fdic.gov/ debt guarantee program,├â┬ó├óÔÇÜ┬¼├é┬Ø Calabria said. ├â┬ó├óÔÇÜ┬¼├àÔÇ£She helped prolong the foreclosure crisis by continuing to claim ├â┬ó├óÔÇÜ┬¼├ï┼ôexploding [adjustable-rate mortgages]' were the primary driver, when they ultimately had little to do with the crisis.├â┬ó├óÔÇÜ┬¼├é┬Ø
""FDIC"":http://www.fdic.gov/ spokesperson Andrew Gray declined to comment on the remarks, saying Calabria ""can have his own perspective"" on Bair.
Gray praised the ""FDIC"":http://www.fdic.gov/ chairman's role as an ""early warner [sic] of what we saw in the housing market... and mortgage market,"" adding that Bair ""championed government initiative to get ahead of the"" financial crisis.
The spokesman credited Bair with a smooth handling of the loss of hundreds of ""FDIC"":http://www.fdic.gov/-insured mortgages and called her bipartisan support in the nation's Capitol an indicator of her success.
Bair leaves her position on July 8, at which time ""FDIC"":http://www.fdic.gov/ vice-chairman Martin Gruenberg will take over as chairman or acting chairman, if he fails to pass the Senate confirmation process.
Gray said that the chairman looks forward to writing a book and spending time with her family once she leaves.
""It├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós been a very hectic five years, and I think she├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós looking forward to some down time,"" he said.