Wednesday, November 21, 2012

Sheila Bair and the Slow Boring of Hard Boards

In her memoir of her service as head of the Federal Deposit Insurance Corporation, Sheila Bair tells  cute one on herself on how she emerged from a meeting with bank CEOs to be confronted by a gaggle of protesters who mistook her for a CEO.  One yelled: "How much did that suit cost that you have on?"

Bair recounts gleefully, "his jaw dropped when I responded truthfully that it had cost $139 at Macy's."

It's a moment to savor although I think it might impart meaning beyond what she seems to notice.  I've said before that I have thought   that one reason she had so much trouble getting along with all the other bank regulators is that they treated her like a grrrrl: cutting her out of critical negotiations, failing (or choosing not) to keep her informed, seemingly ignoring any of her own policy proposals.

I'll stick to that but I'll add: in this crowd, can you really take seriously a person in a $139 suit?

I guess I don't quite have my heart on this.  Truth is, I haven't any idea where Ben Bernanke or Tim Geithner get their suits, and indeed if they are spending a lot of  money on fancy threads, I'd have to wonder where it was all coming from.

Still, I think I'm right on fundamentals.  For good reasons or bad, Bair was never deploy the same heft as the rest of the crowd.  So in a lot of press accounts, and also in Steve Rattner's (mostly fascinating) account of his work in the auto bailout, she comes across as a pesky irrelevance who just didn't get it, who was willing to throw the entire economy into a shambles only to suit her own private vanities.

Shorter Sheila Bair: she is one of those who thought that the bailout should have been far less generous with  the shareholders and bondholders of the banks, far more willing to kick out old inculpated management, far more aggressive about capping sweetheart compensation deals for so many who helped to create the mess.  It's a position in which I am largely in sympathy  although I'll admit that it's a complicated complex of issues and that the devil is in a great many details.

By every account, the soft-on-bankers policy appears to be the handiwork of one who was not a banker himself--Tim Geithner, the bureaucrat's bureaucrat, who has survive so many storms to continue as Secretary of Treasury.  Her memoir is now the third memoir I've read by people who ran crosswise with Geither during the crisis times.  The other two--Neil Barofsky's Bailout and Jeff Connaughton's The Payoff.  Both are worthwhile reads in their way but both are heavy on their own frustration and disappointment with the administration's financial leadership, particularly as exemplified by Geithner.  [Noam Schieber's The Escape Artists  is similar in tone but it is reportage, not a memoir.]

Given this background,  one might well have expected Bair's book to be more of the same.  It is, sort of, but in the end it is, perhaps surprisingly, the least rancorous of the three.  Oh, no doubt she's frustrated with Geithner and his no-banker-left-behind approach  But this is a lady who has spent a good deal of her adult life on Capitol Hill: implicitly, you can tell she understands that you've just got to deal with some people whether you like them or not.  And she seems to take a certain pride in the fact that at the end, Geithner, even Geithner, comes to her farewell party--and makes a wry but not ungraceful joke about their difficult relationship.

Perhaps a second reason the book is not mired in disappointment is that   Bair won a fair number of incremental battles even if she did not win the war.  She seems to have been able to make some deals go the way she wanted them to go, and in particular when it came to the matter of reform, she seems to have played a large, albeit not dominant, role in shaping the Dodd Frank Act.  And one more reason for lack of ranker: although she may not have noticed it herself, she seems to have had an immense good time doing what she did.  At least by her own account, she seems to have been kept herself well briefed on every relevant issue.  Also, again by her on own account, she seems to have enjoyed the support of a loyal, talented and energetic staff who were delighted to fight the good fight alongside her.

So what you get in the end is not precisely story of triumph.  What you do have, however, is one of the better books I've read about how this kind of high-end policy scrum really works.  The tictoc can get a little numbing after a while--it has taken me about a month to get through the whole thing.  But I'll gladly keep it on hand as an offering as prep material for any student who finds himself lucky enough to get a chance actually to observe this kind of dustup in real time.

Two disconnected afterthoughts.  I said that Bair ran crosswise with Steve Rattner on the auto bailout.  Th issue was the use of FDIC resources to support the car companies.  In his book (Overhaul), Rattner make it clear that he found her obstructive, parochial and short-sighted; Bair in her book makes it clear she thinks she is being treated unfairly.   I though Rattner's book fascinating and I think in general he deserves top marks for his management of the bailout.  On the substance of the particular issue, I tend to side with her, not him.  I think her concerns were legitimate and she was right to push them.  In this case, then, I think it is he who is being parochial and short-sighted. On the other hand, I can hardly blame him.  It was his job to ram through the auto bailout and it is in the nature of things that he won't have an easy time understanding those who take a different view.

Second afterthought: on issues of grand strategy in the financial crisis,  the reader will have surmised that I count myself as part of the anti-Geithner faction.  I think his banker-protective policy--ring fence and coddle your friends, let everybody else go to smash--is bad politics and terrible policy.  I don't doubt his integrity or his seriousness of purpose: I just think he is catastrophically wrong.  Yet as DeLong likes to say, the cossacks work for the tsar.  If we have been stuck with this wrongheadedness for so long, it is because Obama wants him there.   Odd because in accounts by many people, Obama alone seems capable to entertain a much broader and more wholesome view. But for the foreseeable future, it is Geithner we've got and Geithner we will keep.  And that is because Obama wants it so.

Third afterthought: would be fun if Bair got the not to chair  the new Financial Stability Oversight Council, though.


John Haskell said...

Barofsky's book was not named "Payoff." Also, spell check

Buce said...

Ha, thanks. I so wish I had an editor. But grrrl was intentional.

The New York Crank said...

Do you have nitpitcky readers? Boy-oh-boyyyyy! (Okay, reader, come and get me!)

Crankily yours,
The New York Crank

P.S. When asked the price of her suit, Blair shoulda said "none of your business!" A perfectly good-looking suit can start to look cheap when you mention it cost $135. And mention that a crappy-looking suit was $2,500 and people will think the way it drapes on you is a personally-ordered eccentricity.

Very crankily yours,
The New York Crank