Penn Arts and Sciences

Ending Too Big to Fail: Financial Regulation After Dodd-Frank (Sheila Bair)

Thursday, May 9, 2013 - 2:00pm - 4:30pm

View panel discussion now on YouTube.

Co-sponsored by THE WHARTON SCHOOL and the Penn Institute for Urban Research (Penn IUR)

The talk by Chairman Bair will be followed by a panel discussion on financial regulation featuring Bair and Wharton Professors Franklin Allen, Richard Herring and Susan Wachter.

AS CHAIRMAN OF THE FDIC DURING THE FINANCIAL CRISIS, Sheila Bair oversaw the successful resolution of over 350 banking institutions representing assets in excess of $800 billion.  Working in tandem with the Federal Reserve Board and US Treasury Department, the FDIC was deeply involved in the frenetic efforts to stabilize troubled financial behemoths such as Wachovia, Citibank and Bank of America, representing trillions of dollars in assets.

Chairman Bair fought a public --if not always successful -- battle against government bailouts and decried the lack of adequate tools to deal with failing financial conglomerates.  She successfully sought new authority in the Dodd-Frank financial reform law to place all large financial institutions under the same type of receivership process the FDIC has successfully used for insured banks, thus shifting the financial burden of failure onto creditors and shareholders, not taxpayers.

"The bailouts, while stabilizing the financial system in the short term, have created a long-term drag on our economy.  Because we propped up the mismanaged institutions, our financial sector remains bloated.  The well-managed institutions have to compete with the boneheads.  We did not force financial institutions to shed their bad assets and recognize their losses.  Lingering uncertainty about the true extent of those losses made previously profligate management more risk averse when prudent risk taking and lending were most needed, particularly by small businesses.  Only in 2012 did we finally see some meaningful pickup in lending by the big financial institutions.  Economic growth is sluggish, unemployment remains high.  The housing market still struggles.  I hope that our economy continues to improve.  But it will do so despite the bailouts, not because of them."
-- From Bull by the Horns (2012)

Sheila C. Bair served as the 19th Chairman of the Federal Deposit Insurance Corporation for a five-year term, from June 2006 through June 2011. As FDIC Chairman, Ms. Bair presided over a tumultuous period in the nation’s financial sector, working to bolster public confidence and system stability. Determined not to turn to taxpayer borrowing during the crisis, the FDIC managed its losses and liquidity needs entirely through its traditional industry-funded resources.  In response to the financial crisis, she developed innovative and stabilizing programs that provided temporary liquidity guarantees to unfreeze credit markets and increased deposit insurance limits.  In 2007, she was a singular – and prescient – advocate for systematic loan modifications to stem the coming tidal wave of foreclosures. Ms. Bair also led FDIC resolution strategies to sell failing banks to healthier institutions, while providing credit support of future losses from failed banks’ troubled loans. That strategy saved the Deposit Insurance Fund $40 billion over losses it would have incurred if the FDIC had liquidated those banks.

Chairman Bair has also received several honors for her published work on financial issues, including her educational writings on money and finance for children, and for professional achievement. Among the honors she has received are: Distinguished Achievement Award, Association of Education Publishers (2005); Personal Service Feature of the Year, and Author of the Month Awards, Highlights Magazine for Children (2002, 2003 and 2004); and The Treasury Medal (2002). Her first children’s book, Rock, Brock and the Savings Shock, was published in 2006 and her second, Isabel’s Car Wash, in 2008. Bull by the Horns (2012) documents her tenure as FDIC Chairman.

She is also a regular contributor to CNN Money.

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