Sheila Bair’s term as chairman of the Federal Deposit Insurance Corp. has been one of the most tumultuous in banking history.
She played a large role in your financial life and that of the country’s during her five-year term from 2006 to 2011. Even during normal times, the FDIC is a critical, but little-noticed, instrument for protecting bank customers. But recent times have been anything but normal for the financial system, and the FDIC has found itself at ground zero of the financial collapse.
The FDIC has three main duties: monitoring the safety and soundness of banks, insuring consumer deposits and taking over failing banks, which entails shutting them down or selling them to other banks in an orderly fashion.
During the worst of the crisis, Bair became a leading advocate for consumers, especially struggling homeowners, and made the FDIC one of the key tools in the government’s response to the financial crisis. If you had an account at Wachovia, Washington Mutual or another institution upended by the financial crisis, and barely noticed, then you benefited from the work of Bair and the FDIC bank auditors she has lead.
Here are some notable changes at the FDIC during Bair’s stewardship:
- An increase in the FDIC insurance limit from $100,000 to $250,000 per individual.
- The takeover and resolution of 374 failed banks.
- The resolution of some of the biggest bank failures in history, including Washington Mutual and IndyMac Bank.
- The orderly sale of failing banks such as Countrywide and Wachovia to healthier institutions rather than seizing them, in part by guaranteeing help on future losses.
- Establishment of the Temporary Liquidity Guarantee Program during the height of the financial crisis to backstop critical business transactional accounts such as those used for making payroll.
- Creation of the FDIC Loan Modification Program for mortgages held by what was once IndyMac Bank. It became a template for the Home Affordable Modification Program, or HAMP, a program designed to enable borrowers who meet eligibility requirements to avoid foreclosure by modifying mortgage loans to a level that is affordable for borrowers and sustainable for the long term.
- Expansion of the FDIC’s role in banking regulation under the financial reform law, the Dodd-Frank Act, resulting in greater power to take over and resolve troubled, nonbank financial institutions such as AIG and the now-defunct Lehman Brothers.
- Introduction of new rules and regulations resulting from Dodd-Frank, and preparation for some FDIC functions to be transferred to the new Consumer Financial Protection Bureau.
While Bair has received much praise for these accomplishments, her tenure was not without controversy. During the financial crisis, some, including Sen. Charles Schumer, D-N.Y., criticized her for moving too slowly to take over embattled institutions such as IndyMac. And recently, Bair was heckled at an American Bankers Association gathering for supporting what some bankers see as onerous, new regulatory burdens under Dodd-Frank.
But Bair likely will be seen as one of the most important directors in FDIC history. She will be succeeded by Martin Gruenberg, current vice chairman and past acting chairman, who previously worked on the staff of the Senate Committee on Banking, Housing and Urban Affairs.