Bair, a regulator for the people
In Sheila we trust.
Maybe that should be the new mantra for U.S. taxpayers — especially ones who don’t feel the nation’s bankers have shown sufficient gratitude for being bailed out and saved from their own incompetence and greed.
Sheila Bair, once again, has shown that she may be the one financial regulator who gets it.
The Financial Times is reporting that Bair and the Federal Deposit Insurance Corp took the lead in pushing Citigroup to hire and outside consultant to determine whether the bank’s management team is up to the task of fixing the ailing financial giant.
The consultant is supposed to work with the bank’s board in coming up with a plan for potential management changes by the end of October.
Now it’s not shocking that Bair would be at the forefront of pushing for new leadership. The FDIC chair has had her fair share of disagreements with Citi chief executive Vikram Pandit over personnel moves and strategic decisions. Many believe Bair would like to see Pandit ousted from his job — something I’d like to see too.
Equally, it’s not surprising that Bair doesn’t have many admirers inside the halls of Citi’s corporate headquarters in midtown Manhattan. Many at the de facto government-owned bank believe Bair simply wants to dismantle Citi rather than try to revive it. Citi’s top brass also complain that Bair simply isn’t a fan of the concept of a global bank.
But that testy, if not acrimonious, relationship between a bank and its regulator is a good thing. A bank regulator’s job should be to look out for the well-being of the financial system, not to be a BFF — best friend forever — with any of the institutions he or she oversees.
For too long, regulators have coddled the banks and not raised too many questions about the deals they were doing.
I don’t recall anyone at the Federal Reserve ever questioning all the subprime-mortgage backed securities Citi was keeping on its books, or Citi’s decision to take a leadership role in creating those hideous “structured investment vehicles.”
And don’t even bother to ask what the folks at the Securities and Exchange Commission and Treasury Department were doing during the build-up of the housing and credit market bubbles.
A lot of pundits, bloggers and economists have suggested that the financial crisis might not have gotten so bad if regulators had done a better job over the past few years of keeping the banks they oversaw at arm’s length and focused more on the public good.
On Wall Street they call the situation in which regulators get too chummy with bankers “regulatory capture.”
Thankfully, Bair has shown that she is no prisoner to this phenomenon. Sadly, the same can’t be said for many of the nation’s other top financial cops.