I had the opportunity to see former FDIC Chair Sheila Bair address the Executives’ Club of Chicago this morning and distribute her new book, Bull By the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself. A pro-regulation Republican, Bair faulted Wall Street for its “short-sighted avarice” and said we need “more long-term thinking” about what is in the public interest. The priority now for Congress, Bair said, must be implementing the Dodd-Frank Act, “getting the rules done.” Her five recommendations for financial reform include:
(1) end Too Big To Fail financial institutions;
(2) constrain leverage risk by implementing simple capital requirements;
(3) get the private sector back into mortgage securitization but require them to retain a portion of mortgage risk (skin in the game);
(4) end speculation in credit default swaps; and,
(5) end the revolving door between regulators/Congress and the financial/consulting industry.
Regarding the impending “fiscal cliff” on federal budget and deficit issues, Bair believes that “shared sacrifice must be part of any grand bargain.” Bair has been a Senior Advisor to the Pew Charitable Trusts since leaving the FDIC in 2011.
Bair’s recommendation that Congress focus on quickly getting the rules done for the Dodd-Frank Act are consistent with Woodstock Institute’s calls for implementing financial reforms to protect consumers from the deregulation and toxic mortgages that caused the financial crisis, to reform the mortgage finance system, and to empower consumers through the new Consumer Financial Protection Bureau. While the broad strokes of financial reform were outlined by the Dodd-Frank Act, the hard work of delineating the specifics of consumer protection regulation is ongoing. Consumer advocates must be closely engaged with the implementation process and ensure that regulators are hearing from more than just industry lobbyists.