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FDIC’s Bair: Bank Bailouts Were ‘Not a Good Idea’

In an interview with Paul Solman, FDIC chairwoman Sheila Bair discusses lessons learned from the financial crisis, and looks back on the federal bailout of institutions deemed "too-big-to-fail," saying, "In retrospect, I think it was not a good idea."

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  • JIM LEHRER:

    Now: the woman in charge of regulating the banks in the U.S.

    Our economics correspondent, Paul Solman, spoke with her today. It's part of his ongoing reporting on "Making Sense" of financial news.

  • PAUL SOLMAN:

    At a recent meeting of the American Bankers Association, protesters in the streets demanding that banks stop blocking financial reform and put an end to foreclosures.

    Demonstrators inside received a message of support from an unlikely source, Sheila Bair, who's in charge of insuring the nation's 8,000-plus banks.

    SHEILA BAIR, chairwoman, Federal Deposit Insurance Corporation: I don't know how anybody can say that we have done a good job protecting consumers and financial services. I just don't see it. So, we need this new agency… I know. No, no, it has not.

  • PAUL SOLMAN:

    An unusual forum, perhaps, for a government official to issue a dissent, but, then again, Bair is known for defying convention.

    A lifelong Republican, Bair was appointed in 2006 by President George W. Bush to head the FDIC, or Federal Deposit Insurance Corporation, which guarantees bank deposits up to $250,000 per person, $500,000 per joint account.

    But Bair's views on the government's response to the crisis put her at odds with the Bush administration. She butted heads with then-Treasury Secretary Paulson over the use of the Troubled Asset Relief Program, or TARP.

    In testimony last fall, Paulson said TARP funds should be used to help Wall Street, not troubled homeowners.

    HENRY PAULSON, former U.S. Treasury Secretary: I have reservations about spending TARP resources to directly subsidize foreclosure mitigation, because this is different than the original investment intent.

  • PAUL SOLMAN:

    Bair said the government had to do more to keep people in their homes.

  • SHEILA BAIR:

    We need to prevent unnecessary foreclosures, and we need to modify loans at a much faster pace.

  • U.S. PRESIDENT BARACK OBAMA:

    Families can get basic consumer loans.

  • PAUL SOLMAN:

    Bair has also clashed with the Obama administration. A disagreement with Treasury Secretary Timothy Geithner over what to do about troubled banking Citigroup led Geithner, according to some reports, to seek her removal from office. "The New York Post" parodied the dispute, Geithner as the Gotham City nemesis the Joker outfoxing FDIC Batgirl cop Sheila Bair.

  • SHEILA BAIR:

    All in favor, say aye.

  • MEN AND WOMEN:

    Aye.

  • SHEILA BAIR:

    Motion is agreed to.

  • PAUL SOLMAN:

    Instead, as bank failures have mounted, already 120 so far this year, Bair's clout seems to have grown.

    Yesterday, to cover future failures, the FDIC voted to collect the next three years of premiums from insured banks right away, a total of $45 billion. "Forbes" magazine ranks her second most powerful woman in the world, behind German Chancellor Angela Merkel.

    I sat down with Sheila Bair earlier today.

    Sheila Bair, welcome.

  • SHEILA BAIR:

    Thank you.