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Author: yodaorange Big red star, 1000 posts Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 461347  
Subject: Sheila Bair book on credit crisis Date: 9/25/2012 10:32 PM
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Sheila Bair was Chairman of the Federal Deposit Insurance Corporation from June 2006 through July 2011. Today, her new book Bull by the Horns: Fighting to Save Main Street From Wall Street and Wall Street From Itself was released. [1] She published an excerpt in Fortune. [2]

The excerpt and other quotes from her seem pretty blunt, i.e. doesn’t sound like she is pulling any punches.


Pandit looked nervous, and no wonder. More than any other institution represented in that room, his bank was in trouble. Frankly, I doubted that he was up to the job. He had been brought in to clean up the mess at Citi. He had gotten the job with the support of Robert Rubin, the former secretary of the Treasury who now served as Citi's titular head. I thought Pandit had been a poor choice. He was a hedge fund manager by occupation and one with a mixed record at that. He had no experience as a commercial banker, yet now he was heading one of the biggest banks in the country.

Still half-listening to Kovacevich, I let my gaze drift toward Kenneth Lewis, who stood awkwardly at the end of the big conference table, away from the rest of the group. Lewis, the head of the North Carolina-based Bank of America (BAC) -- had never really fit in with this crowd. He was viewed somewhat as a country bumpkin by the CEOs of the big New York banks, and not completely without justification. He was a decent traditional banker, but as a dealmaker his skills were clearly wanting, as demonstrated by his recent, overpriced bids to buy Countrywide Financial, a leading originator of toxic mortgages, and Merrill Lynch, a leading packager of securities based on toxic mortgages originated by Countrywide and its ilk.


In the excerpt, she offers a theory of TARP that I have not heard before, referring to Citi:


Citi probably did need that kind of massive government assistance (indeed, it would need two more bailouts later on), but there was the rub. How much of the decision-making was being driven through the prism of the special needs of that one, politically connected institution? Were we throwing trillions of dollars at all the banks to camouflage its problems? Were the others really in danger of failing? Or were we just softening the damage to their bottom lines through cheap capital and debt guarantees?


If the main impetus for TARP was to save Citi because it was “politically connected” it would be a big deal. It is interesting to hear her say, the rest of the TBTF would have been able to survive without TARP.

Separate from the Fortune excerpt, the Wall Street Journal has posted a few comments as they read the book. [3] [4]


J.P. Morgan JPM -1.65%’s Jamie Dimon gets pretty good marks in the book. Bair praises his leadership skills and ability to protect his bank from the crisis.

On Lloyd Blankfein
After initially being peeved at Goldman Sachs CEO Lloyd Blankfein for not bidding on failing banks, Bair describes him as helping the FDIC secure investments from other big banks – as well as ponying up his own – for faltering ShoreBank Corp. of Chicago, a 1970s-era pioneer in lending to low- and middle-income neighborhoods. Blankfein’s help was apparently sparked by a call Bair made “in a snit” to Warren Buffett, who had earlier invested in Goldman. “I was probably out of line, but I told him I was frustrated with Goldman’s complete lack of interest in helping us capitalize failing institutions” despite the fact Goldman benefited from being able to become a bank holding company during the crisis.

Blankfein was calling with an offer to help within the hour.

The news that Obama had nominated Geithner instead felt “like a punch in the gut,” Bair writes. “I did not understand how someone who had campaigned on a ‘change’ agenda could appoint someone who had been so involved in contributing to the financial mess that had gotten Obama elected.”

She highlights a bad moment for Geithner when Obama starts getting pummeled in the press over the pending payout of $165 million in bonuses to employees at AIG AIG -2.42%. Walking into the Oval office for a meeting with the president, Bair describes Geithner and White House economic adviser Larry Summers as looking “uncomfortable, their eyes downcast.” Geithner had failed to warn the president about the bonus situation, Bair writes. Now a visibly fuming Obama was asking her if she had any ideas on how to stop them being paid out.

“I wanted to say, just fire them,” Bair recalls, but settled on pitching her ideas on new powers for the FDIC to prevent taxpayers from having to bailout future AIGs.



Sounds like an interesting read. . .

Thanks,

Yodaorange




[1] Sheila Bair “Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself”

http://www.amazon.com/Bull-Horns-Fighting-Street-Itself/dp/1...

[2] Sheila Bair Fortune book excerpt

http://finance.fortune.cnn.com/2012/09/20/bair-bull-horns/



[3-4} Wall Street Journal blog reports on the book

http://blogs.wsj.com/deals/2012/09/25/sheila-bair-really-thi...
http://blogs.wsj.com/deals/2012/09/25/bair-on-geithners-appo...
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