Sheila Bair: Thank you, Mike, that was a very kind introduction; it’s nice to be back with deposit insurers. It’s been 12 years since I left the FDIC, and it seems like almost yesterday in terms of some of the vivid memories I still have from the great financial crisis. I was just so proud of the agency during the five years I was there. Some people said the FDIC had a good crisis; I don’t think anybody had a good crisis, but I do think the agency performed extremely well and bolstered public confidence in the system. We’re going to talk about the return of bank runs, but I want to note that during the great financial crisis, deposits were running to banks, not out of them, and that was because of the FDIC. I see a lot of the former colleagues here, and it’s wonderful seeing you again.
so I took it for what it was. I thought about the comment, and I thought, “You know, I kind of like that. Yeah, the FDIC is there for the little guy.” Because very early in my career, I worked for a senator named Bob Dole. He was a populist in the good sense of the word. And he was very fond of saying something that really stuck with me, and I’ve tried to live by that in my government service: that the role of government is not to protect the rich and powerful. That the role of the government is to protect people who can’t protect themselves. When it comes to banking, regular everyday mainstream households, don’t have the financial acumen to figure out which bank is safe and which bank isn’t. They just need a safe place to put their money: they need a place they know is going to have stable value; it’s going to be there when they need it; they’re not going to lose it. It’s going to be there to pay their bills, pay for the food, pay for the rent, pay for the doctor, whatever. And they need protection from the government, which is why we provide deposit insurance to them. We provide a lot of prudential regulation as well to make sure the banks take good care of their money, but we also provide that deposit insurance back stop, and that is so important to them on a personal level as well more on a systemic level. Obviously, with deposit insurance caps - almost all of us have deposit insurance caps - the idea is that we want to protect the people who we don’t really think should be expected to have the financial acumen to be evaluating whether banks are safe and sound or not to be going to their call reports. Big depositors, have a lot of money in the bank. They should be able to figure it out and that way we get some market discipline. So that’s the theory, right? That’s the theory. Well, in practice it doesn’t always work that way, and uninsured depositors, those big depositors, can certainly run in a crisis. We saw it during the great financial crisis, and we certainly saw it with the failure of Silicon Valley Bank last spring. I was fascinated by what happened at Silicon Valley Bank because of course they ended up getting bailed out. The vast majority of the deposits at Silicon Valley were not only uninsured but held by some of the richest people on the planet. So some of those accounts, yes, those were transaction accounts that some of the startups were
We’re going to talk about the return of bank runs, but I want to note that during the great financial crisis, deposits were running to banks, not out of them, and that was because of the FDIC.
One thing that Mike didn’t mention in my bio is that earlier in my misspent youth, I actually worked for the New York Stock Exchange. Yes, I was one of those Wall Street people. I worked there probably about a total of seven years, and I’m glad I did actually, because it was a good experience. I think everybody needs to work for the private sector and get some sense of what that’s about. When I learned that I was going to be nominated as Chair of the FDIC, one of the associates I knew on Wall Street, a guy with a big securities firm, he kind of sniffed, and he said, “Oh, you’re going to be Chair of the FDIC.” He said, “Well, they take care of the little people.” He was talking about depositors below $100,000, which was the deposit limit at the time. And he kind of meant it as a putdown, you know, typical guy. He was a big wheel, he would never be interested in anybody with less than $100,000 in the bank,
12 INTERNATIONAL COLLABORATION
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