FDIC Chief: Smaller Banks 'Doing A Better Job' Lending

Sheila Bair, who heads the FDIC, swung by All Things Considered yesterday.

Here are a few key quotes from her interview.

On bank failures:

It's going to be difficult this year. We had 140 bank failures last year, and we think there will be more bank failures this year. However, we have more than 8,000 insured depository institutions out there. Most of them are profitable, well capitalized and doing fine.

On lending by small versus large banks:

The smaller banks are doing a better job in continuing to make loans than the larger institutions. ... And we've also asked [large banks] not to ... say, well, certain areas of the country we're not going to lend or certain, you know, business types were not going to lend, or certain size of loans we're not going to lend. Those types of model-driven formulas we think are harmful. And so we encourage all banks, large and small, to make individual credit determinations. So if you have a credit worthy borrower, know your borrower and make the loan.

On Chris Dodd's finance bill:

There's a piece of what we call resolution authority which would basically create a mechanism to take over a large financial institution that has gotten itself into trouble and break it up and sell it. This is a type of process we use for smaller institutions. This is a mechanism that used to be used for all the large banks, as well, and then a lot of what had been traditional banking activity moved into non-banks. And so we really have no resolution process for activity that's moved outside of an insured depository institution, and that was really where the lion's share of the problems were created during this crisis. So, on the resolution piece in particular, we're very supportive.



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