Is Sheila Bair a Hypocrite?

Jonathan Weil joined Bloomberg News as a columnist in 2007, and his columns on finance and accounting won Best in the Business awards from the Society of American Business Editors and Writers in 2009 and 2010.
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Sheila Bair, the Federal Deposit Insurance Corp.'s chairman from 2006 to 2011, has been hired for a new gig as a board member at the Spanish lender Banco Santander SA. This seems to have gotten some people upset, even riled.

Ben White, Politico's resident distributor of banking-industry talking points, has a post today saying that "the move angered many in the banking world who have found themselves targeted for criticism by Bair over similar alleged conflicts of interest." Really, though, "angered" probably was the wrong word. More likely, the people in the banking world who whispered in White's ear were delighted, tickled, giggling like toddlers and generally overflowing with joy at the news that Bair would be joining a big bank's board. Now it would be a breeze to paint her as a hypocrite.

The general rule in banking is that it's OK to become a regulator, put in a few years playing nice with the industry, then take a cushy board seat. Bair didn't follow that path exactly. Now and then she made some remarks criticizing the way huge banks were run. But she never said anything so piercing or harsh that it distracted them from blowing up the financial system while she was FDIC chairman. She didn't interfere with anybody's bailout checks. She kept the FDIC's bank-financed insurance fund woefully undercapitalized for years. It's hard to see why "many in the banking world" are upset with her. But if Ben White says they are, then that settles it.

White pointed out that Bair, in her book "Bull by the Horns," wrote: "I would like to see financial regulation be viewed as a lifelong career choice -- similar to the Foreign Service -- rather than a revolving door to a better-paying job in the private sector. There should be a lifetime ban on regulators working for financial institutions they have regulated." And it's true that Santander bought Philadelphia-based Sovereign Bancorp in 2009, toward the end of her tenure as FDIC chairman. But this hardly looks like anything to be outraged about.

If she had joined Citigroup Inc.'s board after all the nasty things she said about that bank (and really, who among us hasn't said nasty things about Citigroup?), that would be one thing. But Santander? It probably could use her help. Plus, there clearly is reputational risk for Bair. If Santander blows up on her watch, she may never live it down.

How else is a former banking regulator supposed to make a living, anyway? This is par for the course. It isn't Bair's fault that a lot of people who were looking to find heroes amid the banking-crisis wreckage decided to anoint her. (There weren't many candidates available.)

You don't see anyone pulling out knives for former FDIC Chairman William Isaac, now chairman of Fifth Third Bancorp., maybe because he never got on his moral high horse. Fifth Third settled accounting-fraud claims in December with the Securities and Exchange Commission. But Isaac isn't catching grief for associating himself with Fifth Third just because he used to be FDIC chairman way back in the 1980s.

Bair's predecessor, Donald Powell, later joined Bank of America Corp.'s board. His predecessor, Donna Tanoue, joined Bank of Hawaii Corp.'s board after leaving the FDIC. That's the bank where Barack Obama's grandmother used to work, and she was a nice person, too. No scandal there.

Give Sheila Bair a break.

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