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Finance & Accounting
Pages 4 (1004 words)
Sheila Bair’s Bank Shot Sheila Bair’s Bank Shot as written by Joe Nocera is an exit interview on Federal Deposit Insurance Corporation’s (FDIC) chairperson Sheila Bair published a day after her term expired. The interview basically revolved around the 2008 financial crisis, highlighting the important role played by Bair before, during and after the event.
Two of the most significant of these is: 1) her insistence on greater regulation long before policymakers and experts started to preach it; and, 2) her position that banks in trouble are not necessarily needed to be bailed out. The article, hence, underscore the importance of listening to this lady in the context of averting possible reoccurrence of similar crisis in the future. Charles Kindleberger’s theory and analyses of financial crises are descriptive and it provided the general basis for Nocera’s agreement with Bair’s position on regulation and the 2008 financial crisis. Kindleberger’s model describes an exogenous shock to the system also called as displacement. The causes of such displacement are varied and could provide diverse degree of crisis severity. The tendency to speculate as well as the inevitable complacency that comes with a stable and growing financial economy on the part of regulatory bodies are crucial elements in aggravating such displacement. These run parallel with actions taken by Bair before the 2008 crisis struck. She has started warning about the explosive growth of subprime mortgages, demonstrating traces of the principles behind the Kindleberger model on financial crises. ...
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