Whoa, Sheila Bair Is So Not On Board The President's Overhaul

The Business Insider ^ | 6/19/09

[FromLori]

Well, this is what happens when you screw over the FDIC and give all the fun regulatory powers to the Federal Reserve.

Sheila Bair (who already has the reputation of not really being a team player) was on CNBC this morning (via Calculated Risk), talking about the new regulatory overhaul. Try telling us this sounds like someone ready to help push the new plan:

Clearly, there has been moral hazard and lack of market discipline fed by the 'too big to fail' doctrine, and this in turn has been fed by the lack of resolution mechanism that really works for very large financial organizations and this has been a central focus of ours,” Bair said in an interview on CNBC.

President Barack Obama's sweeping plan to reform financial regulation, which was unveiled on Wednesday, included a proposal to make the FDIC the resolution authority responsible for unwinding troubled financial firms.

“[Obama’s regulation is] a good opening to the process,” said Bair. “I commend the President for getting personally involved in this and taking leadership and putting his own considerable influence behind the efforts…We’re still analyzing the whitepaper and want to work with the administration and Congress constructively on this.”

Really? Damn, that's cold.

On a separete (though possibly semantic) point, we're not sure that there's really a "too big to fail doctrine" as Bair describes. It's not a policy, either. It's an acknowledgment. When Bernanke and Paulson tried to halt the panic in the banking system last fall, they didn't do so because they believed as a matter policy that some banks were "too big to fail," rather they believed that because they had grown so big, their failure would've been too devastating to society.

Now you can disagree with them.

[griswold3]

Chair Bair said this morning that when her term is up, she will be ‘spending more time with her family.’

I keep having this recurring nightmare that Larry Summers is going to be Fed Chair next. But, my night terror comes when I see Paul Krugman sitting at the head of the table!

[FromLori]

People are pushing for summers but because bo is owned by the banks I think he will keep helicopter ben myself.

[DannyTN]

Obama’s idea of combining the Fed and FDIC into one regulating authority is a bad idea. One authority is likely to have one focus.

Their rationale is that with more than one regulator nobody is taking responsibility for any new stuff, like credit derivatives. Personally, I think the FDIC should have considered the riskiness of bank owned credit derivatives all along.

Combining the lender of last resort, The Federal Reserve, with the bank oversight, FDIC, is a very bad move. This will lend result in bad banks being bailed out by the Federal Reserve instead of closed by the FDIC even in good times.

[FlyVet]

There might not be a "too big to fail" doctrine in writing, but during the Clinton and Bush II years, it seemed that every other week I'd hear of another mega-merger between two huge corporations.

Supposedly, the breakup of AT&T was due to monopoly, so I had two wonder why, in the following decades, slouching toward monopoly in the banking/investment industry was okay.

Well, now we know why. 1) Create entities that are too big to fail, then fill them with corrupt and incompetent management. 3) Provide corrupt and incompetent congressional oversight. 3) When Too Big to Fail blows up, use as an excuse to rob the hapless serfs blind.