There are several truly awful potential Treasury Secretaries for both McCain and Obama, people whose appointment would be a real travesty, an insult to the intelligence of the voting public. Sheila Bair, FDIC chair, who has been mentioned as a potential nominee, isn't one of them, from what I can tell - she is not of Wall Street, not in the old boys' club, and was sounding warnings about the subprime crisis long before folks like Paulson noticed.
Things seem to be going relatively smoothly at the FDIC, also, even as they see us through a string of unprecedented bank failures. Bob Kuttner had some nice words for her a few weeks ago (too nice, actually).
That said, Bair is going to be the first person featured in my efforts to shed some light on the historical record and increase the google-ability of the embarrassing quotes and wrongheaded policy positions of Treasury Secretary candidates.
I should qualify that - in light of recent events, this stuff should be embarrassing, but given the wartime mentality of the media on economic issues right now, as well as journalists' lack of knowledge and willingness to get played by Wall Street types over and over and over again, this stuff probably won't get too much press.
Anyway, here goes, another time capsule, from a 1993 Bloomberg article:
The Commodity Futures Trading Commission (CFTC) has given the US$4.8 trillion derivatives market a clean bill of health, saying that fundamental changes in the way the market is regulated are not needed.
That was the central conclusion of a 174-page report the commission has released on the over-the-counter derivatives market.
The CFTC report comes on the heels of warnings by the Bundesbank and some Federal Reserve officials that the burgeoning market could pose a serious threat to the world financial system.
Earlier reports by federal banking regulators and the Group of 30, a banking industry council, had said that while better reporting and self-policing were needed, the industry did not pose a significant risk. A separate study by the General Accounting Office is due by year's end.
"We have a strong affinity for derivatives at this agency," said acting CFTC chairman Sheila Bair. "We like them."
This quote, given the context, is similar to saying "We love unregulated markets, and we want them to stay unregulated." Sort of strange to express such deep love for financial instruments, especially from the regulatory side, but I guess it's an effective way of convincing Wall Street that you're on their side. It boils down to a strong stand in favor of deregulation.
So Sheila Bair loved derivatives of all sorts and didn't see a need to regulate them. I'm sure she also loved her job and career more than she loved being intellectually honest about things, and unfortunately she probably couldn't have both. Quick way to get marginalized in the nineties: come out hard in favor of financial regulation.
But once again, on the flipside, there's Henry Gonzalez:
"The Banking Committee and the regulatory agencies must unwind this mystery called the derivatives market because the ultimate bank insurers - the American taxpayers - deserve to know what they are underwriting," Gonzalez said in a written statement that was recently released.
Gonzalez said he does not necessarily want to restrict banks from engaging in derivatives, which they can use to help minimize risk and increase profitability.
However, he said, "what is good for one bank may not be good for all of them." He noted that when the banking industry jumped into loans for less-developed countries, for leveraged buyouts, and for speculative real estate, many banks failed.
So some people were right, and some people were wrong. Unfortunately, the wrong people will end up in the next administration.
Over the next few months, we should be very suspicious of anyone who says that now is not the time to assign blame or dig up the past. They might as well suggest that records don't matter, that leadership failures are irrelevant, that corruption has nothing to do with this crisis, that we should throw accountability out the window and judge leaders on the basis of - what, exactly? And there are plenty of journalists and bloggers parrotting this line about this not being the time to assign blame. The financial crisis is, in large part, a crisis of accountability, and we're being told that the last thing we should do right now is pursue accountability. It's absurd.