No matter your opinion of Sheila Bair, you always know where she stands.

As she departs as head of the Federal Deposit Insurance Corp. (FDIC) after a historic period of financial tumult and regulatory reform, Bair wishes more regulators felt empowered to be candid with the public about their views, even if they rock the boat.

"There's some sense that the regulatory process should be closed and opaque and secretive and if we have disagreements we need to hide them and we shouldn't let people know what we're really thinking," Bair said in an interview with American Banker days before her July 8 departure. "I don't buy any of that."

Five years after taking the helm of the agency, Bair is planning to take a break from the policy scene, write a book and join an unidentified foundation in the fall.

At the FDIC, she says she is most proud of how the agency — which displayed significant morale issues upon her arrival — "rallied very quickly" to respond to the glut of failed banks, although she regrets a decision early on in the crisis regarding the closure of IndyMac Bank.

While she will miss FDIC staff, Bair said she will not miss "interagency infighting on … rulemakings."

"I just wish we could get beyond it sometimes," she said. "We usually end up resolving our differences, but, boy, sometimes it takes a long time to get there. I wish we could make that process work a little better."

Longer-term, she signaled interest in running a university someday or even a return to government.

If Bair steps out of public view for a time, she is unlikely to be forgotten. At a time when market events have sparked a constant string of intense debates, her bold positions on effective regulation thrust the FDIC — not always a high-profile regulator — into the forefront of nearly every issue related to the crisis. That visibility in turn earned the agency a fair share of both fans, such as lawmakers of both parties, and harsh critics, including bankers put off by her aggressive views.

Bair said she would have had it no other way. Although credited with being way ahead of her counterparts on calling aspects of the crisis, including the systemic nature of foreclosures, Bair said at times the FDIC's position in policy discussions was not given a fair hearing, let alone acknowledged. Going public was a way to give the agency a voice.

"There have been a number of occasions especially in the crisis where I went public only after a lot of internal discussions and just getting nowhere," she said. "There were times where I felt that to get people's attention we needed to be public, and I think it had some effect.

"I think we got farther with a lot of these initiatives than we otherwise would have if we had just meekly gone away and not pestered anybody. I don't regret it. I know it is not traditional for banking regulators to debate policies publicly. We always try to have conversations first. But I also think it's not necessarily bad to discuss these publicly."

Bair said regulators, who may face objections to their policies or their positions being misrepresented in the public space, need to speak out or else "we start losing the debate."

"You do need to speak up and articulate what we're doing, why we're doing it, explain it to the public and let them decide, but at least make sure our viewpoint is out there," she said. "The culture, especially for bank regulators, is not to speak out. But I think on these policy issues it's important for the general public to understand why they're important."

Of course, when she arrived at the agency, there was considerably less to talk about. The biggest topics of the day — whether Wal-Mart Stores Inc. should get an industrial loan company charter and implementing new deposit-insurance premium rules — seem minor after the 2008 crisis.

"It was the 'Golden Age of Banking,'" she recalled. "I said that at my first or second" Quarterly Banking Profile "press conference: 'This is the Golden Age of Banking.'"

It was a similar experience in her previous government role. When she became assistant Treasury secretary for financial institutions, she was hoping for and expecting a job that allowed more time for family.

"We had just adopted our daughter from China, and I didn't want a demanding job," Bair said. (She and her husband also have an older son, who is leaving for college in the fall.)

"The Bush people said it would be 9 to 5. Things like privacy and whether banks should get into real estate. … Then 9/11 hit and Enron hit and it was just a 24/7 job again."

The FDIC "was kind of the same thing. They said, 'This will be 9 to 5.' And it wasn't."

Bair acknowledged that the scope of the crisis took her somewhat by surprise. At Treasury, she had been familiar with predatory issues related to subprime loans, but the sheer breadth of the problem only became clear later.

"The kind of stuff that we thought of as abusive then — like steep payment resets and negative amortization and the prepayment penalties and all that — they had kind of gone mainstream," she said. "What also surprised me was the collateral damage of the CDOs and the structured deals and the synthetic derivatives — trillions of exposure based on hundreds of billions of mortgages going bad. That really magnified the loss."

Although she forcefully and repeatedly warned about the dangers of these types of loans, Bair said she still did not see the damage they would cause.

"As bad as I knew subprime and the nontraditional mortgages were, I never thought it would have led to this global, on-the-brink crisis that we experienced in the fall and early winter of 2008," she said.

In the end, Bair said she thinks history will look kindly on the FDIC's role in handling the wave of failures stemming from the crisis.

"We did our core mission, but we did it very well under very challenging circumstances," she said. "Sometimes I think we made it look too easy because I don't think the agency gets as much credit as it should. It was really a lot of work behind the scenes. A lot of stress, a lot of long hours by the staff. It was really phenomenal the way they really quickly put the infrastructure together to handle this very large volume of bank failures."

But there were some early hiccups. Among the lows of her tenure, Bair said, was the highly negative staff morale she faced when joining the agency, a remnant of the massive FDIC downsizing that followed the banking crises of the eighties and early nineties.

"When I first got here, I was a little taken aback," she said. "There were tensions with the union and there were tensions with the IG. There was just a lot of unhappiness. That wasn't anybody's fault. That was just kind of symptomatic of the downsizing that had to occur."

Bair took steps to strengthen communication lines between different personnel levels, and altered an agency program for awarding merit bonuses that had caused angst.

"The environment … was that regulation had come out of favor," she said. "It wasn't necessarily viewed as a good thing to be a regulator, and with so few bank failures people had kind of forgotten about how important we are, or at least we weren't front and center in terms of relevance in the public eye."

"We created a culture-change initiative and a culture-change council and I think we really turned it around. Those employees needed to feel better about themselves and their jobs as we got into the crisis. They did. Morale was improving and they were energized and ready to tackle it. Now everybody is still really exhausted, but morale is still high here and I feel good about that."

Yet the failure of IndyMac in July 2007 — which was still early in the crisis but proved to be perhaps the most complex resolution of the cycle — revealed other cracks in the system.

The failure of the Southern California thrift was the largest at that point stemming from the mortgage debacle, and it included a large amount of uninsured depositors. News coverage of the failure highlighted anxious depositors standing in line outside looking for answers about their money.

Bair said she regretted that regulators — hoping to control information spreading about the failure — made the call to close it before the end of normal hours. That ended up spooking customers who had come to do their usual banking business. Since then, no failure has taken place before the normal close of business, she said.

"There were legitimate reasons for doing that, with communications, because it was so much later here, they were concerned about getting information out to members of Congress and others about what was going on. That all sounded reasonable," she said. "We went ahead and closed it a few hours early, and never again because I still remember seeing people did come after the closing and they were banging on the door and CNN was filming it and that loop all weekend, I was just really troubled by that. And so the orders went out: No other closing occurred before normal business hours."

While Bair hails the job regulators did in stabilizing the system, she said she regrets the amount of generosity provided for creditors through the government bailouts, and wishes haircuts could have been more a part of the conversation.

"This whole crisis — all the bailouts — what it really was all about was bondholders, let's face it. It was about whether bondholders were going to take some losses or not," she said. "Our process is: bondholders take losses. They're unsecured and that's where they are in the priority scheme and we don't have an insurance program for bondholders. We have an insurance program for deposits.

"I do looking back on this wonder if perhaps some measure of loss should have been imposed on some of these bondholders, or counterparties in the AIG situation," Bair said. "I get that the system was interconnected and we couldn't have this domino effect where one institution goes down and imposes losses on others. But why not a 10% haircut, I mean, something? … I do wonder if that was more generous than it needed to be."

Had the government had the tools provided by the subsequent Dodd-Frank Act to resolve systemically important firms, four or five companies would have likely been recommended for an FDIC receivership or forced to accept merger deals that in 2008 they rejected, she said.

The bailouts that did occur, she added, have had their own repercussions.

"Even if you think it's okay to bail out big banks, which I don't, let's just look at the damage this has caused, to the reputation of the banking industry, to the reputation of regulators, to the reputation of government," she said. "People are angry and they have a right to be. This has created a lot of cynicism and disaffection."

The problem isn't just an American one.

"Look at what's going on in Greece right now," Bair added. "At the end of the day, one of the reasons they're rioting is because they think a lot of big-bank bondholders are not being asked to absorb any of the losses. In a capitalist society, this is not what you do."

As for the surviving banks, Bair said there is "mutual respect" between the FDIC and the industry, although she acknowledged concerns bankers have expressed about her policies.

"I think they appreciate some of the things I've done. I think they've disagreed with some of the things I've done. That's the way it should be," she said. "We have an independent role, we have an independent function. It's not our job to be their advocate or their cheerleader. It's our job to supervise them and to make sure they comply with the rules."

But Bair said she is "still to this day kind of mystified" by the cold reception she was given by an American Bankers Association audience at a speech in March, in which her remarks on the importance of implementing Dodd-Frank provisions were at times greeted by testy reactions.

"That was a very curious thing. I've spoken with the ABA I don't know how many times. When I was at Treasury, I spoke to them. I've never had a reception like that," she said.

She acknowledged that she had a "somewhat direct message" to them.

"What I was trying to say to them was to support responsible, effective regulation, because the whole industry is tainted by the bad players," Bair said. "The ABA has initiated this image project, right? You need to improve your image by working with your regulators and supporting effective measures to try to make sure everybody in the industry does the appropriate thing with their insured deposits. That was the message I was trying to convey. I must say I almost felt like there had been an effort to stir them up on overdraft protection. That really seemed to be what was leading it."

With about a week left in her term, Bair said she is looking forward to a break.

"I thought maybe I should just stop reading the newspaper for a few months," she said, although adding, "I will always be interested in what happens at this agency. That will always be the case, whether it's bank failures or whatever is happening."

In the short term, she will focus on finishing a memoir about the crisis, which will not be "a tell-all."

"There will be things that happened here, interacting with other regulators, interacting with industry people, and some of the insights I picked up on the way," she said.

She declined to name which foundation she is joining in the fall. But she did indicate a desire to return to an executive position at some point, although, she said, "I don't see myself running for [political] office."

"I'm attracted to public-purpose goals, I guess, and I think the government obviously has public policy objectives. A lot of nonprofit work does as well. Academia has attracted me too, just because I like young people. I like to make sure young people get good educations and also an academic and cultural environment that instills good values, good leadership values — if it's a business school, good ethical values," she said.

"There is a lot of good that can be accomplished in the academic world as well. I like running things. I do. I do like running things. We'll see: a university or a foundation of some sort, eventually, might be a very attractive thing. Or going back into the government too could be attractive as well."

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