What A Public Servant Should Be

by Stuart Shapiro

Sheila Bair was appointed by George W. Bush and came up the ranks working for Senator Robert Dole.  During the financial crisis, she was not afraid to argue with bigger names like Bernanke, Paulson, and Geithner.  This week she left the chairmanship of the FDIC and Joe Nocera had a long exit interview with her.

Not long after she took charge in June 2006, Bair began sounding the alarm about the dangers posed by the explosive growth of subprime mortgages, which she feared would not only ravage neighborhoods when homeowners began to default — as they inevitably did — but also wreak havoc on the banking system. The F.D.I.C. was the only bank regulator in Washington to do so.

I don’t agree with everything she says in the article but she was the only one making the point that bondholders know their risks and therefore should have absorbed the costs of them during the bailouts.  She was right about that and about a lot of other things and was brave enough to consistently speak truth to power.  We could use a dozen more like her in charge of things.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.