FDIC Conductor Wields a Steady Hand

FDIC Chairman Sheila C. Bair helped orchestrate the sales of Wachovia to Citigroup and of Washington Mutual to J.P. Morgan Chase. (By Joshua Roberts -- Bloomberg News)

"There were some really heavy egos around that table, people with 30 and 40 years' experience in the minutia of mortgage loans, and she just moved that group in a way that I marvel at," Eakes said. "Had I pushed the same issues, I would have had everybody screaming at me."

Nonetheless, Bair's relationship with the banking industry has sometimes been rocky. Bankers, subject to Bair's authority, are reluctant to talk about her publicly. Her first action at the FDIC was to raise the premiums banks must pay to insure deposits, an inherently unpopular idea.

More recently, Bair has ruffled feathers by arguing repeatedly that mortgage companies should perform mass modifications of loans to help borrowers avoid foreclosure. Industry executives say that loans must be modified on an individual basis and that Bair is touting an impractical plan because it sounds good.

Bair acknowledges that she sometimes walks on the wingtips of bankers, but says she has the industry's health at heart.

"It didn't make me popular with a lot of people, but there needed to be a light cast on this," she said of her advocacy for loan modifications.

Bair, 54, was born in Wichita and went to the University of Kansas for a degree in philosophy and then for law school. Then she moved to Washington to work for Sen. Robert Dole (R-Kan.). One of her fellow staff members was Joshua B. Bolten, who would become chief of staff to President Bush.

Bair left Washington intending to return. She ran for a U.S. House seat in southeastern Kansas in 1990, riding a bicycle between homes in the small towns that dotted the district. She lost in the Republican primary. She favored abortion rights, and she was outspent by about three dollars to one.

So she spent the go-go 1990s working in the financial markets, as a regulator at the Commodity Futures Trading Commission and then as a lawyer at the New York Stock Exchange.

She first became concerned about subprime lending in 2001, after she became an assistant secretary at the Treasury Department, overseeing financial institutions. She wrote and spoke about her belief that some lenders were taking advantage of borrowers, and together with other early sirens such as Federal Reserve Governor Edward Gramlich, she warned of the need for more regulation to protect consumers.

There was no audience for that advice at the time, and Bair soon left Washington again to teach at the University of Massachusetts. She said she believed she was done with public life.

She moved into an old house that faced the former home of poet Emily Dickinson, opened an account at a local community bank and wrote a book for children about the importance of saving money. She also taught and wrote extensively about issues such as the need for banking services for lower-income families.

"She was terrific in demonstrating why the history of the policy is important to the shaping of policy itself," said Thomas O'Brien, who was dean of the Isenberg School of Management and taught a class with her. "She showed how ideas got shaped and how policy came from those discussions and compromises."