FDIC chairman shakes up Washington, Wall Street
By ALAN ZIBEL – 7 hours ago
The Wall Street crowd that packed into the ballroom of the fancy Times Square hotel didn't know what was about to hit it. As the bankers and analysts sliced into their grilled beef tenderloin and chicken, Sheila Bair stepped up to the microphone and told them off.
Too many people couldn't make their mortgage payments, she said. The mortgage industry was sitting on a ticking time bomb and just didn't get it. Pick up the phone, she said, and talk to borrowers.
"The sense of hostility from that audience was overwhelming," said Howard Glaser, a Washington-based mortgage industry consultant who sat at Bair's table that day in October 2007.
"I thought they were literally going to throw their desserts at her."
It would not be the last time the chairman of the Federal Deposit Insurance Corp. got under somebody's skin. Since the banking crisis erupted, Bair has led the call for more government action, creating a rift with former President George W. Bush's treasury secretary, Henry Paulson, and thrusting herself into the limelight.
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Critics say she is on a liberal crusade, but the 54-year-old Republican has won a key ally: President Barack Obama. She's working closely with the new administration on a plan to reshape the financial world by creating a so-called "bad bank" that would mop up hundreds of billions in toxic assets from the balance sheets of U.S. banks.
The bad bank, if adopted, might be run by Bair's agency, the FDIC.
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After graduating from law school in 1978, Bair took a job as a civil rights lawyer for Department of Health, Education and Welfare. Eventually, she landed on the staff of Sen. Bob Dole, a fellow Kansan. Being from "a good Kansas Republican family," didn't hurt, Bair said.
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As the subprime crisis exploded, she became an outspoken voice for government intervention, though her ideas never caught on with the Bush administration. Democrats in Congress, though, embraced them with fervor. Last November she broke with Paulson and proposed using some of the $700 billion in financial bailout money to prevent foreclosures.
"She made bitter enemies out of the (Bush) administration," said William Seidman, who led the FDIC from 1985 to 1991. "If they had their choice of one official that they could personally throttle, she would lead the list."
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"She's off on a lot of social missions," said Bert Ely, a banking industry consultant in Alexandria, Va.
Bair, though, said she remains "very much a capitalist."
"Sometimes people misinterpret that as somehow I'm not a real Republican or something. I very much am. I guess I'm more of a Teddy Roosevelt kind of a Republican ... It's been said that Franklin would be proud of me, but I think Teddy would be proud of me too." [...]