Joe Nocera interviews Shelia Bair

Joe Nocera of the New York Times has a very interesting interview (see here) with Shelia Bair (outgoing Chairwoman of the FDIC).  It deserves to be widely read.

In my opinion Sheila Bair is one of the people who acted courageously during the financial crisis.  Unfortunately, she was viewed by Geithner and company as a difficult person to work with and someone that wouldn't go along with the team.  Below is a portion of Nocera's interview that gives you a sense of Bair's position.

“Why did we do the bailouts?” she went on. “It was all about the bondholders,” she said. “They did not want to impose losses on bondholders, and we did. We kept saying: ‘There is no insurance premium on bondholders,’ you know? For the little guy on Main Street who has bank deposits, we charge the banks a premium for that, and it gets passed on to the customer. We don’t have the same thing for bondholders. They’re supposed to take losses.” (Treasury’s response is that spooking the bond markets would have made the crisis much worse and that ultimately taxpayers have made out extremely well as a consequence of the government’s actions during the crisis.) 

She had a second problem with the way the government went about saving the system. It acted as if no one were at fault — that it was all just an unfortunate matter of “a system come undone,” as she put it.

Ms. Bair has an editorial over at the Washington Post (see here) that is worth a read.