Sheila Bair Visits Occupy Wall Street

Sheila Bair, the former FDIC chairman who heads the Systemic Risk Council, and Ricardo Delfina, a fellow Systemic Risk Council member, met on Sunday with members of several Occupy Wall Street working groups: Occupy Bank, Alternative Banking, and Occupy the SEC. I’ve watched presentations by Bair twice previously: once when she was at the FDIC, another not long after she had left government service. Even though she had been pretty direct in those discussions, she was surprisingly specific in this meeting about some of the impediments she faced during the crisis. Some of the topics:

Citigroup. Bair wanted Citi resolved. However, she was not in a good position to do so, since the OCC was Citi’s primary regulator and it, along with the Treasury and Fed, were adamantly opposed. The FDIC regulated only the depositary, which was about $1 trillion of the then roughly $2 trillion bank. That meant it had data only on that operation, since the Treasury and OCC, which had better data, refused to share it. And she stressed that that the information she had was not very good thanks to Citi’s lousy information systems. She could have forced a resolution through a seldom-used mechanism (used only 6 times in the FDIC’s history) but it would have been extremely aggressive to do so, and she felt she could justify it given her incomplete vantage. She pushed hard for a fallback of firing incumbent management and the board and using a good bank/bad bank structure, which would have had shareholders and bondholders take losses.