Here at Bankers Anonymous we have a preference, nay, a weakness, for ex-bankers. So nobody should be surprised by today’s shout out to Sheila Bair, the Ex-FDIC Chairman.
Now that she’s an Ex, you might expect a quiet life of cozy board memberships, charitable-event headlining, and the occasional ringing in of the New York Stock Exchange. You might expect that, but you’d be wrong.
Bair came out swinging yesterday, against federally-insured banks engaging in what frankly we know to be speculative trading, often masked as hedging.
When we open the “Ex-Bankers Who Rock” award nominations for 2012[1], Bair begins the Road to the Championship with a strong lead.
Why? A few exhibits:
This Washington Post letter is so hilariously sarcastic and spot-on,[2] it’s hard to believe a government bureaucrat wrote it. So much goodness in that letter, I’ll have to do a special post on it soon.
Second, she apparently played a major turd-in-the-punchbowl role during the massive TARP bailouts of 2008, refusing to go along with Paulson and Geithner’s plan to guarantee every banking creditor. She didn’t blow up their plans, but she foot-dragged and pushed back enough to make clear that expediency was the enemy of good in much of the TARP bailout.
Third, along with Paul Volker[3], she represents the Vanguard of Common Sense against the TBTF[4] crowd. Bair and her allies[5] argue logically that federal guarantees for banking deposits (via the FDIC) make for a terrible mix with proprietary securities trading activities, given the moral hazard, and given what we now know to be limitless public liability in the US and in Europe, in the event of failure.
Cheers to you, Bair.
[1] Not a bad idea, right?
[2] “Are you concerned about growing income inequality in America? Are you resentful of all that wealth concentrated in the 1 percent? I’ve got the perfect solution, a modest proposal that involves just a small adjustment in the Federal Reserve’s easy monetary policy. Best of all, it will mean that none of us have to work for a living anymore[…]Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)”
[3] Whose name is shorthand for the fight, at this point.
[4] Too Big To Fail, but you already knew that.
[5] Worth a click through to the WSJ editorial from two weeks ago. This Texas bank chairman sums it up nicely, (even if he’s a bit hoky with the ‘Uncle Joe’ stuff.)
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