Sheila Bair: Rising Star

Yesterday morning I caught an interview with Sheila Bair, chairwoman of the FDIC, on NPR's Morning Edition. According to the NPR piece, Bair sounded alarms when the housing bubble was still inflating:

Bair has a reputation as a consumer advocate who hasn't always won the praise of the lending industry. Two years ago, when the economy and housing were booming, she warned lenders that they needed to rework subprime loans — or risk damaging the economy.

It wasn't a popular position at the time, said Ellen Seidman, a former director of the Office of Thrift Supervision and now a fellow at The New America Foundation.

"To some extent, she was getting the 'Hey lady, you're not supposed to be talking about this' reaction," said Seidman. "She began very early saying we have a problem here."

And now the job of cleaning it up is an overtime job. Bair laughs about her BlackBerry: She's constantly trading communication with FDIC staff, Warren Buffett, interest groups and — of course — Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

Considering Bair's foresight, I am relieved to hear of her constant contact with Paulson. So is The American Prospect, which has been putting forth the idea that Bair might just be a good choice to take over as Treasury Secretary in the new administration:

Bair has used FDIC's temporary ownership of a large failed bank, Indy Mac, to demonstrate how a mortgage refinancing program can be done right. The FDIC has contacted all of Indy Mac's mortgage holders who are in financial straits, and is working out easier mortgage terms. In some cases, bondholders are made to eat part of the loss. This is the right approach to repairing the entire subprime mess. So Bair has both the background and the commitment to do the recapitalizing and regulating of American banks correctly.

In her interview with NPR, Bair did not seem to be activly seeking an appointment to the Treasury - in fact, she quipped that she was looking forward to the end of the crisis so that she could go back to being unknown. Yet, Robert Kuttner, Bair's advocte at The American Prospect, makes quite a case for her being the perfect candidate - so if the candidates are reading TAP, we might be hearing a lot more about Sheila Bair in the coming months.