Sheila Bair Quotes

Why did we do the bailouts? It was all about the bondholders. They [the Treasury Department officials] did not want to impose losses on bondholders and we did. We kept saying, “There is no insurance premium on bondholders”… For the little guy on Main Street who has bank deposits, we charge the banks a premium for that, and it gets passed on to the customers. We don’t have the same thing for bondholders. They’re supposed to take losses.

 
Context
The Treasure Officials had a reason for bailing out the bondholders. They were afraid that if bank bondholders and owners took big losses at that time, it would “spook” the financial markets and cause even worse panics than then existed. The political pressure would be to bail out the financial institutions which would have lost much more money after the “spooking”. So it was, they argued, less cost to the taxpayer to bail out the bondholders at the beginning and save the bailout costs later. Some argued that there was no reason to bail out the richest people in America if they lose a lot of money so it is not an issue of bail out now or later. History shoed that the financial leaders did have the clout to force the government to bail them out however. There are some who wanted to have a showdown with the wealth banks and other financial institutions and let them go bankrupt and then the economy would right itself. No one really knows for sure which is why Economics is called the “dismal science”—See {596873}.
Citations

Sheila Bair, Chairperson of the U.S. Federal Deposit Insurance Corporation (FDIC), Explanation of why she opposed bailing out the banks in the Meltdown of 2008 and the Great Recession that followed, Quoted in Joe Nocera, “Sheila Bair’s Bank Shot”, New York Times Magazine, July 10, 2011

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Sheila Bair
Sheila Bair
  • Born: April 3, 1954
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Sheila Colleen Bair was the 19th Chair of the U.S. Federal Deposit Insurance Corporation (FDIC), during which time she assumed a prominent role in the government's response to the 2008 financial crisis. She was appointed to the post for a five-year term on June 26, 2006 by George W. Bush.

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