Sheila Bair’s Final ‘Sense on Cents’

Sheila Bair, Chairman of the Federal Deposit Insurance Corporation (FDIC), pauses as she speaks during a news briefing May 27, 2009 in Washington, DC. Bair announced the bank and thrift industry turned a profit in the first quarter of 2009.

In one corner, we have Jamie Dimon who on behalf of his shareholders would seemingly like to maintain as much of the status quo for the powers that remain in the Wall Street oligopoly.

In another corner, we have Barack Obama grasping at straws that might breathe some lifeblood into the economy and support his prospects for reelection.

Who occupies the center of the ring and is neither compromised by the large money interests on Wall Street nor the pursuit of perpetuating a political career in Washington?

Sheila Bair.

The soon-to-retire head of the FDIC–she steps down in early July–provided perhaps her final dose of ‘sense on cents’ this morning. What did she have to say?

Ms. Bair spoke earlier today at the Council on Foreign Relations. The Wall Street Journal provides a summary overview of Ms. Bair’s ‘sense on cents’ in writing, FDIC’s Bair: New Capital Rules Won’t Hurt Lending. I have not always agreed with every position that Ms. Bair has held but I have always believed her to be a truly honest broker and an individual who has our nation’s best interests at heart. What pearls of wisdom did Ms. Bair share?

1. a higher regulatory capital requirement for banks won’t hold back lending

2. urged President Barack Obama to appoint a head for the consumer protection agency soon.

3. the banking industry—and the economy—need a more sweeping effort to resolve the mortgage foreclosure mess that has engulfed the housing market. “The market needs to clear” distressed properties, but the foreclosure process has become “dysfunctional,” she said. “We are doing incremental things” to resolve the issue. “We need to do something dramatic” that would simplify the modification process for delinquent home owners, she said. She added, “I am quite angry at the servicers” who collect mortgage payments and handle foreclosures.

4. It was leverage, not high capital requirements, that killed credit availability and the problem now is borrower demand, not capital.

5. said that 10% capital, which bankers consider high, still allows banks to generate a “nice” return.

6. has repeatedly criticized big banks for their role in the financial meltdown and has been more of a proponent of community banks, said big banks without a plan for how they can be dismantled in a crisis should keep one percentage point more capital.

7. said she believes new rules for banks to keep a 5% stake in securitized mortgage pools are sufficient.

8. said the government needs to keep some role in the mortgage market to protect low-income households.

9. said the FDIC is working on changing its internal rating system for banks to make the ratings more forward looking.

Sheila Bair has consistently been willing to take on both political parties and all the participants enmeshed in the Wall Street-Washington incest. Our nation will miss her pursuit of the truth, transparency, and integrity.

With her comments today, she further solidifies her position in the Sense on Cents Hall of Fame. Others on Wall Street and in Washington would be wise to follow her lead.

Sheila Bair ‘gets it.’

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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