Bye-Bye Bair: Bipartisan Bill Backer

11.05.2011
Those attempting to follow the Dodd-Frank regulatory process would do well to note the departure of FDIC Chairman Sheila Bair -- and to read the tea leaves for any change in future emphasis on the part of the regulator.

Bair, whose resignation letter to President Obama was widely expected, given her intention not to serve beyond her five-year term, . She said she would exit on July 8, leaving Vice Chairman Martin Gruenberg the likely choice as the agency's acting chairman. He is expected to be nominated by the White House shortly to succeed her.

A former counsel to former senator and Republican presidential nominee Bob Dole, Bair is no radical. The first President Bush appointed her to the CFTC, where she was reappointed by President Clinton. President George W. Bush named her to her present job. But in five years since that appointment she has managed to anger people on both sides of the aisle. In the Obama administration, the FDIC chairman has been tangling with Treasury Secretary Timothy Geithner over the management of Citibank, insisting that broad changes at the top of that financial institution are necessary to give taxpayers a chance of recovering $50 billion cash and $300 billion of toxic asset guarantees.

Her arguments in favor and defense of , on the other hand, must have made some of her erstwhile Republican allies see red. The act's provisions giving FDIC the authority to place falling financial firms into receivership were marked for elimination in the most recent budget to come out of Congress, but Blair has apparently refused to fall in with this aspect of the push for deregulation.

As recently as May 5, the head of the FDIC gave a speech titled " in which she told a Chicago banking conference that "the dilemma policymakers faced in the failure of large, complex financial institutions resembles a hostage drama."

Last month, the outlining how it could have ensured the orderly liquidation of Lehman Brothers Holdings if it had had the Dodd-Frank powers in 2008, selling the collapsed behemoth to Barclays, its "most likely acquirer." Looking ahead, the report calls it "more likely that debt holders and other general creditors will receive greater recoveries under the Dodd-Frank Act than they would have otherwise received in a Chapter 7 liquidation or a Chapter 11 reorganization."