Widely lauded for her steady hand in leading the FDIC through the worst financial crisis since the great depression, Sheila Bair has a proven track record of effective leadership and decision-making under extraordinary pressure– when the consequences are nothing short of calamitous if the decision is wrong. In naming her to their 100 Most Influential People in 2009, Time Magazine recognized that Bair’s unusual clout derives from the breadth of her command and her guts in staking new ground. Topics Chairman Bair will address in her remarks:
- Assessing risk with imperfect information;
- Evaluating options when there is no choice but to act;
- Resolving conflicts with other decision makers under crisis conditions;
- Dealing with the media and Congress;
- Women navigating male power structures;
- Keeping faith with the public interest and standing up for the little guy.
Ten years after the 2008 financial crisis, Chairman Bair provides her recollections of those momentous times. She discusses the early warning signs extending back to 2001 that were ignored; the struggle to tighten mortgage lending standards in 2006 and 2007 as mortgage defaults began to escalate; and her advocacy for wide-scale loan restructuring to halt foreclosures that were skyrocketing by the end of 2007.
She will also provide perspectives on the controversial bailout measures undertaken during the market tumult, including the bold decision by the FDIC to guarantee hundreds of billions of dollars of debt issued by banking organizations; her reluctance to participate in big bank bailouts, but ultimate decision to do so as the least bad of no good options; and her explanation of new tools secured by the FDIC in the 2010 Dodd-Frank financial reform law to impose great market discipline on bank investors and greater accountability for boards and managers complicit in bank failures. She will opine on institutional tensions between the FDIC and other agencies but how they got beyond those differences to make critical decisions. She will review philosophical disagreements on the wisdom of protecting bank bondholders, managers, and directors when banks fail, and her regret that not more was done to help homeowners.
Recognized by Warren Buffett and others as one of the four key players in the financial crisis (along with Hank Paulson, Ben Bernanke and Tim Geithner) who “grasped the gravity of the situation and acted with courage and dispatch,” Bair’s insights provide valuable historical perspective on the lessons of the financial crisis – lessons that must not be lost.
Since leaving the FDIC, Chairman Bair has held a number of board director and advisory roles to several large publicly traded companies as well as start-up financial technology firms. Chairman Bair will discuss how her perspectives have developed and evolved as a former regulator who now sits on the other side of the table. She will share the most rewarding parts of corporate board directorships, (strategy development and oversight), the most challenging (asking tough questions without impairing board/management collegiality and trust), and achieving the right balance in board reporting (avoiding the quagmire of TMI, while getting enough information to ask informed questions).
As a former independent board member and now advisory board member to Spain’s Grupo Santander, as well as current independent director of the Industrial and Commercial Bank of China (ICBC) the largest bank in the world by assets, she will share perspectives on the particular challenges of international board members, ranging from cultural differences to mundane matters such as traveling and translation which can have a huge impact on board effectiveness.
Early in her tenure at the FDIC, Chairman Bair worked extensively with Chinese authorities on the development of their deposit insurance system. That system was delayed by the financial crisis but finalized in 2015. Since leaving the FDIC, Chairman Bair has continued to be actively involved with the Chinese financial system, serving as a member of the International Advisory Council (IAC) to the China Bank Regulatory System since 2012, and as an independent director of China’s — and the world’s— largest bank by assets, the Industrial and Commercial Bank of China (ICBC) since March 2017. As such, Chairman Bair has developed a unique perspective on basic differences in the structure and governance of the Chinese and US banking systems, and their increasingly divergent regulatory philosophies as US regulators loosen post-crisis reforms to fuel credit expansion while the Chinese tighten standards to contain asset bubbles and generate sustainable economic growth. Chairman Bair compares US governance, with its emphasis on maximizing shareholder value, with China’s emphasis on the social responsibility obligations of a state-owned enterprise. While she remains committed to the US system, she discusses her concerns that US financial institutions’ role in the 2008 crisis continues to weigh on the US’ ability to advocate for markets as the most efficient and socially beneficial way to allocate resources and spawn innovation and the increasing tendency of developing markets to look to the more state-directed model used in China.
Chairman Bair currently serves as an advisor or independent director to a number of financial technology firms. She believes financial technology holds great promise in lowering consumer costs and reducing risks in the financial system, but that regulators — still struggling with post-crisis reforms— are falling behind. The challenge for regulators is to stay ahead of emerging regulatory issues associated with financial technology, while also ensuring that regulation does not create unnecessary, anti-competitive barriers to positive technology innovations.
She will discuss the often confused differences between crypto currencies such as bitcoin, and the blockchain technology that underpins them. She will discuss areas where she thinks blockchain technology holds the greatest potential public benefit, ranging from giving consumers control over the use of their credit histories to reducing systemic risk by shortening settlement times for financial transactions. She will also cover the promise of artificial intelligence in understanding and managing risks in consumer lending, reducing reliance on credit scores and potentially expanding the provision of low-cost credit to borrowers who do not satisfy traditional credit criteria. Other examples of pro-consumer technological benefits include the rise of robo-advisors which make available basic, affordable financial advice to investors with small retirement accounts.
Of all emerging financial technologies, she views blockchain as the most potentially disruptive, serving as a threat to any enterprise whose financial model depends on being a gatekeeper for centralized transaction data. She worries that regulators must be on guard against entrenched intermediaries using regulation to block positive, disruptive innovation. At the same time, regulators must be wary of allowing financial technology to undermine core regulatory principles in the name of “innovation.”