Did Sheila Bair Save the US From Complete Financial Meltdown?

When a moderate (meaning anachronistic) Republican proves to be a more tough minded regulator than Democrats, it serves as yet another proof of how far the county has moved to the right. Bair, in a long “exit interview” with Joe Nocera, says a number of things that would have been regarded as commonsensical and obvious in the 1980s, yet have a whiff of radicalism about them in our era of finance uber alles. For instance: Bear should have been allowed to fail, TBTF banks are a menace (well, she doesn’t say that, but makes it clear she regards them as repugnant), bank bondholders should take their lumps.

Bair was alert to the dangers of subprime, having recognized how dangerous it could be in the early 2000s (when a smaller version of the market blew up, taking homeowners along with it), and was not a believer of the Paulson/Bernanke party line that subprime would be “contained”.