FDIC’s Bair Says Some Bank Chiefs Will Be Replaced
Bloomberg.com (Partial Transcript)May 15 (Bloomberg) — Federal Deposit Insurance Corp. Chairman Sheila Bair
said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend, that some bank chief executives will be replaced in the next couple of months as the U.S. scrutinizes lenders subjected to tests to evaluate their financial strength.
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)AL HUNT: And we begin the program with FDIC chairman Sheila Bair. Thank you for being with us.
SHEILA BAIR: Happy to be here.
AL HUNT: Banks had a good first quarter; the stress tests are completed. Is the banking crisis behind us?
MS. BAIR: (Chuckles.) Well, I think the liquidity crisis that we were seeing last year is over for good, I hope. So now we’ve stabilized the system. I think we’ve put out a lot of additional information to help give people confidence in the banking system. FDIC insurance, of course, is there protecting all of the regular depositors.
MR. HUNT: Right, what’s your biggest worry then?
MS. BAIR: I think that we maintain public confidence. If we lose public confidence, we might get into another liquidity situation. I think that would be bad for everyone.
MR. HUNT: The big banks have generally been given a clean bill of health, but some people say that means they have less incentive to participate in the toxic asset purchase plan. Is that a problem and should they be pressured to do so?
MS. BAIR: Right, well, I think banks are heavily regulated and they work with their regulators all the time. And one of the areas we look at is troubled assets on their balance sheet, and that will continue. And so this facility will be another tool that will be available for them to help cleanse their balance sheets. Some banks will have greater needs than others. But I think, no, the troubled assets are still there and the need is still there to clean that up.
MR. HUNT: And if they are resistant to participating should they be pressured?
MS. BAIR: Well, I think it will be a – I think they need to be – some need to be told that they need to deal with their troubled assets, yes. And, again, this is a facility that will be available to be used for -
MR. HUNT: Healthier banks are talking about repaying the government. Should the big banks that are still on some kind of government life support be able to call their own shots and be in charge of their own governance?
MS. BAIR: (Chuckles.) Well, I think that if the taxpayer has taken an investment interest in a bank, the taxpayer has a right – as part owner – to protect itself. And I think bank regulators have a continuing obligation, if banks are having issues or are in need of government support, to get them to a point where they right their ship and in a position where they can eventually exit these government programs. So, to the extent that it means oversight of adequacy of management and boards, I think that’s absolutely appropriate for regulators to do.
And this is a new environment and we do need bank management and bank boards that know how to work through troubled environments, who know how to do good bread-and-butter basic bank risk management. And so those are the things we’re looking at, and I think that’s quite appropriate.
MR. HUNT: Including replacing some of those boards?
MS. BAIR: Well, I think that – yes. I think if – in some instances, I think it needs to be on an individualized basis. And, again, you can’t paint all banks with the same brush.
MR. HUNT: No, I know.
MS. BAIR: There’s large banks, there’s some that have been managed quite well and are dealing with this crisis quite well. Others have had greater needs for government help. So I think they do need to be closely evaluated. And, you know, I think – I don’t like to get in the position of telling people to make appointments, but I think in terms of criteria, qualifications, I think those types of standards, we have an obligation to articulate.
MR. HUNT: But in the same situation, or similar situation, the government already replaced CEOs at Fannie and Freddie and General Motors -
MS. BAIR: Yes, that’s right.
MR. HUNT: And some people say, well, why is the head of Bank of America still there? Or why are some of these other banks’ CEOs still there?
MS. BAIR: Right, well, obviously I don’t comment on open and operating institutions. I think the review needs to go with both the management and the boards as well, absolutely. And management needs to be evaluated and is this the right skill set, have they been doing a good job, are there people who can do a better job, those kinds of questions.
MR. HUNT: Do you think some will be replaced in the next couple of months without getting into the particulars?
MS. BAIR: Yeah, I think there will be an evaluation process. We’re requesting it as part of the capital plan and yes.
read full trascript here… FDICs Bair Says Some Bank Chiefs Will Be Replaced (Transcript) – Bloomberg.com.
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