The former FDIC Chairwoman, and one of the first people to acknowledge the full risk of subprime loans, offers a unique perspective on the greatest crisis the U.S. has faced since the Great Depression.
Bair was in the room in 2008 when then U.S. Treasury Secretary Hank Paulson called in the heads of the nation's systemically important financial institutions and informed them that the government was going to inject capital into each of them:
'I watched Vikram Pandit scribbling numbers on the back of an envelope. “This is cheap capital,” he announced. I wondered what kind of calculations he needed to make to figure that out. Treasury was asking for only a 5% dividend. For Citi, of course, that was cheap; no private investor was likely to invest in Pandit’s bank. Kovacevich complained, rightfully, that his bank didn’t need $25 billion in capital. I was astonished when Hank shot back that his regulator might have something to say about whether Wells’ capital was adequate if he didn’t take the money. Dimon, always the grownup in the room, said that he didn’t need the money but understood it was important for system stability. Blankfein and Mack echoed his sentiments'.
Excerpt: Fortune magazine
Sheila Bair and the bailout bank titans
About the author
Sheila Bair is the former Chairman of the FDIC (Federal Deposit Insurance Corporation). In 2008 and 2009, Forbes named her the second most powerful woman in the world (behind Germany's Angela Merkel), and in 2009, Time named her one of its 100 Most Influential People.
She has been covered- and lauded - everywhere from The New Yorker to The Washington Post to The Wall Street Journal and has received numerous awards for her leadership of the FDIC, including the Kennedy Library's Profiles in Courage Award. Prior to assuming her post at the FDIC, Bair served as a top advisor to former Senate Majority Leader Robert Dole, as Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury, and as Senior Vice President for Government Relations of the New York Stock Exchange.
The Alchemists: Three Central Bankers and a World on Fire
Hubris: How HBOS Wrecked the Best Bank in Britain
