Bull by the Horns: Trying to Save Main Street from Wall Street and Wall Street from Itself by Sheila Bair

Bull by the Horns is part defense of past action, part call-to-action. Sheila Bair served as chairman of the Federal Deposit Insurance Corporation, one of the chief federal bank regulators, from 2006 through 2011 -- and thus rode the entire wave of the Financial Crisis. By her own account, she clashed with officials of both the Bush and Obama Administrations (in important cases, these were the same individuals). And throughout these times she was the most prominent woman in United States financial regulation.

Bair becomes the FDIC in this story -- she absorbs its mission and makes it her own. The FDIC has a peculiar mission -- and it has never been the only law in banking. Bair believes in deposit insurance but not bailouts. Deposit insurance is paid to depositors in the event of bank failure; bailouts are payouts to shareholders, bondholders and management in the same circumstances. There is a distinction here -- but perhaps not as self-evident a one as Bair imagines. Both deposit insurance and bailouts (under the Too Big to Fail doctrine or otherwise) create moral hazard. Bair though sees banking policy through the FDIC lens -- depositors (up to the FDIC limits) are to be given continuous access to their funds in the event of failure; shareholders and bondholders are to be wiped out and -- at least in most cases -- bank management is to be fired. All very by the book. Which is to say, Bair wants the bank resolution system to work as it is promised to work -- which of course is not at all what happened following the Financial Crisis.

Moreover, Bair seems to have little sympathies for the other agencies involved in federal banking regulation, unless their objectives accidentally converge with those of the FDIC. The Office of the Comptroller of the Currency and the Office of Thrift Supervision are consistently dismissed as completely captured by the institutions they regulate; the Department of Treasury is a political instrument of the White House (although Treasury is often portrayed as a rogue department under Timothy Geithner). The Fed is okay most of the time -- Bair is generally admiring of Bernanke -- but the New York Fed is a different story. Throughout the book, Bair signals which players were friends and which -- the greater number -- were enemies. In all, it is a very personal book: Washington is a field for contesting personalities.

Bair frequently notes her outlier status -- as a woman whose presence disturbs the boys clubs of Washington and Wall Street. Here she is most convincing; one feels the slights she took. She bristles at and takes pride in the snide e-mail of OTS chief John Reich: "I cannot believe the continuing audacity of this woman." Bair is still of the pioneer generation of powerful women -- her politics and values may be conservative, but her experiences form her as a feminist. She surprises herself when a group of women antiwar protesters cheer "Give it to 'em, Sheila!."

Bair describes herself as a Main Streeter -- a 'lifelong Republican' from a small town in Kansas who has been simply blessed with common sense and a sense of public service. She notes she hasn't profited from any revolving door -- she and her husband have a sensible fixed-rate mortgage and she bought her 'fat cat' suit at Macy's for $139. Feminist though she may be, she is essentially Midwestern.

One of the charms of Midwest populism is conviction -- and Bair firmly holds her ideas. At times this leads to probable oversimplification of a more complex reality. I do not know Timothy Geithner. Perhaps Geithner really is an Archfiend, as Bair seems to believe he is (and Robert Rubin, for her, the Prince of Darkness), intent on saving Citibank at any and all costs due to venal personal interests. But there is at least a plausible case that the failure of Citibank might have sent systemic shock waves through the reeling global economy, provoking an even greater catastrophe. Bair fails to acknowledge this possible reading of the banking system's predicament -- a reading that would supply a less self-interested justification for Geithner's actions.

Bair, though widely praised and wildly popular, has had many critics throughout. She takes considerable pains to correct -- in her view -- the accounts of others concerning her various actions taken during the Crisis. If there is a singular idea Bair presents in Bull by the Horns, it is the desirability of having multiple regulators (she fought Chris Dodd's plan for a single financial regulator, along the lines of UK's FSA). The motive for this might be largely defensive: to preserve the independence and mission purity of the FDIC. But multiple points of regulatory authority may be salutary in a Washington poisoned by capture.