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Archive for Tuesday, April 20, 2010

Bair urges financial reform

Sheila Bair — A key player in the economic recovery, Sheila Bair is chairwoman of the Federal Deposit Insurance Corporation. The Independence, Kan., native has had a say in much of the federal government’s response to the financial crisis, recently suggesting the FDIC could ease rules for buying failed banks. Bair earned a bachelor’s degree in philosophy from KU in 1975 and a law degree in 1978.

Sheila Bair — A key player in the economic recovery, Sheila Bair is chairwoman of the Federal Deposit Insurance Corporation. The Independence, Kan., native has had a say in much of the federal government’s response to the financial crisis, recently suggesting the FDIC could ease rules for buying failed banks. Bair earned a bachelor’s degree in philosophy from KU in 1975 and a law degree in 1978.

April 20, 2010

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KU graduate gives Dole lecture

Sheila Bair, chairman for the FDIC, gave a lecture at the Dole Institute of Politics Monday. Bair spoke to a crowd of about 300 guests. Enlarge video

The second-most powerful woman in the world — as ranked by Forbes magazine — is just like everybody else. She doesn’t know whether financial reform can win congressional approval either.

But Sheila Bair, a Kansas University alumna and chair of the Federal Deposit Insurance Corp., told a Dole Institute of Politics crowd of about 300 people on Monday that reform definitely should happen.

“It is not rocket science. Document income. Get a pay stub. See if they have paid bills before,” Bair said of simple tasks many of the country’s largest financial institutions were not doing before issuing risky loans. “Make sure they have some money down. Make sure they have some skin in the game.”

But Bair, whose organization oversees community banks but does not oversee many of the large “shadow banks” that played a major role in the financial crisis, said reform was an uncertain prospect at the moment.

“The good news is that the economy may be coming back. We all hope it is,” Bair said. “But I worry the party could start up again if we don’t put some better regulation in place.”

Bair — who was appointed by George W. Bush in 2006 to a five-year term at the FDIC — is supporting much of President Barack Obama’s financial reform proposal being hailed by supporters as the end of the “too big to fail” concept that the government adopted in the most recent credit crisis.

Bair has been lobbying for all financial institutions — everybody from investment banks to mortgage brokers — to come under the same type of regulatory control that FDIC-insured banks must adhere to currently. That would include tougher lending standards and more ability for the government to take over a failing institution and quickly sell its marketable assets to other good banks.

Opponents to the administration’s reform proposal have argued it will make it more likely that the federal government will become involved in costly financial bailouts in the future. But there wasn’t much of that talk among the Dole Institute crowd Monday. Bair drew praise from audience members as being a common-sense Kansan in the center of the crisis, and even won points for being a philosophy major at KU before going on to receive her law degree at the university.

“Thank God she didn’t take the opium of the people, which is called economics,” said Mohamed El-Hodiri, a professor of economics at KU. “She took philosophy instead, and law, which cares about evidence and doesn’t just live in a dream or fantasy world.”

The near-capacity crowd attracted large numbers of bankers as well.

“I heard her speak a couple of years before this all started breaking, and I thought she was the only one who had any real thoughts about what the problem was and wasn’t afraid to address it ,” said Pat Slabaugh, executive vice president with Douglas County Bank.

Other tidbits from her talk included:

• A call for greater regulation of complicated credit default swaps that allowed speculators to make big bets that bundles of mortgages would default, even though those speculators held no financial stake in the mortgages.

“I can’t take out fire insurance on your house because it gives me an incentive to burn down your house,” Bair said.

• A plea for students and future business leaders to adopt a new attitude on how to make money.

“Money is something important to all of us, but producing something of value, I think, is more important,” Bair said. “I think a lot of the large financial institutions lost sight of that. It is almost like compensation became divorced of providing something of value.”

Comments

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devobrun 3 years, 12 months ago

Sophisticate, Sophisticate, Sophisticate until obfuscation is complete.

Start out the night with 5-card draw....end the night with 7-card high--low Omaha, deuces wild.

She's right, it ain't complicated. Our big brains getting us in trouble again.

Anybody ever read "Galapagos" by Vonnegut?

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mlordner 3 years, 12 months ago

I went to see her lecture yesterday. She did not mention or use the words, "fannie mae", "freddie mac" nor "federal reserve bank" when she was talking about the mortgage security crisis and banking system crisis. It is impossible to talk about those without mentioning these three institutions. I shouldn't have been there at 6pm to sit the very front yesterday. I could find out that she's got a philosophy degree and that she went to law school by looking at Wikipedia.

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barrypenders 3 years, 12 months ago

Mandate Posercare, Bair Finance Crusade, Cap and Trade Manufacturing, Glorebal Warming, Nuclear Gelding, 2nd Amendment Living Breathing Amelioration and Propaganda Fairnes Doctrine.

Bent's Jihad is almost complete.

Stimulus, PAD Transformation, and Posercare live unprecedented

Darwin bless us all

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heyheymama 3 years, 12 months ago

A must read: The Creature from Jekyll Island: A second look at the Federal Reserve

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love2fish_ks 3 years, 12 months ago

If a bank or financial institution is "too big to fail" bust them up! "Finance Reform" that puts decisions of tax payer bailout in the hands of the Treasurer and President is a bad idea. If they are too darn big, make em smaller!!!

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orhs1963 3 years, 12 months ago

Does everyone really think or believe that the "federal government" lacked sufficient regulations due to the fact that home loans were made without the slightest verification of income to make the payment of the home loan principle & interest? The answer is NO!

Look at the number of home mortgages that were processed based on the individual or individuals having enough income to make the home payment including principle, interest, taxes, insurance - THE REASON OF FAILURE WAS THAT THE LOAN WAS BASED ON 3% or 3.5% interest AS AN ADJUSTABLE MORTGAGE. DID ANYONE THINK FOR A SECOND THAT THE INTEREST RATE WOULD REMAIN THE SAME OR GO LOWER WITHIN 2 TO 5 YEARS???

Hello FORECLOSURE!!!! When the market reacted to loan failures (the guy at Goldman knew that these loans were going to fail along with most of the people with any common sense) the market came tumbling down...because the government "bailed out the banks" the world economy will never know if the banks were to big to fail...I believe that big banks should have been made to go through bankruptcy let investors take the hit and not all of the American taxpayers.

For financial reform - very simple; let businesses fail, and bar adjustable mortgages from the market. The loans should either be 15, 20, or 30 year fixed with VA and FHA loans with zero down. AND ONE MORE THING - ELECT FEDERAL OFFICIALS THAT SPEAK THE TRUTH, HAS INTEGRITY, AND THE HIGHEST STANDARD OF ETHICS.

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Paul R Getto 3 years, 12 months ago

I sure don't understand all the intricacies of the financial system, Toe, but I wonder if she really had the power to do what you suggest? It appears the parallel to now and the 1930's is, the govt. regulators allowed the Wall Street barons to use the market like their own private slot machine, with the US govt for backup. Like the 1930's, the regulators allowed the bosses to put 10 cents down on a dollar to risk the other 90% with other people's money.

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toe 3 years, 12 months ago

It is really strange when a government regulator is blaming the lack of regulation for their ineffectiveness. The FDIC could have simply withheld insurance to companies that were taking on too much risk. Car insurance companies do this all of the time. Bair is a cry baby that pretends to be concerned and wrings hands while actually doing nothing.

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