FDIC Chairwoman Suddenly A Star

It's only in times of crisis that the Federal Deposit Insurance Corporation sees the spotlight. And right now, the agency's Chairwoman Sheila Bair is practically famous.

Bair is a native of Kansas and a self-proclaimed fiscally conservative Republican at the center of a mess that's costing the government billions of dollars.

"You have to be fluid, you have to be flexible," Bair said of veering from her general principles of not spending. Last week, with credit frozen and banks not lending, the FDIC took extraordinary steps to insure all non-interest bearing deposits. It also backed newly issued debt for banks, in an effort to get more money to flow.

Bair has a reputation as a consumer advocate who hasn't always won the praise of the lending industry. Two years ago, when the economy and housing were booming, she warned lenders that they needed to rework subprime loans — or risk damaging the economy.

It wasn't a popular position at the time, said Ellen Seidman, a former director of the Office of Thrift Supervision and now a fellow at The New America Foundation.

"To some extent, she was getting the 'Hey lady, you're not supposed to be talking about this' reaction," said Seidman. "She began very early saying we have a problem here."

And now the job of cleaning it up is an overtime job. Bair laughs about her BlackBerry: She's constantly trading communication with FDIC staff, Warren Buffett, interest groups and — of course — Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

Trying to save the U.S. economy makes it more difficult to see her husband and two children, Colleen and Preston.

"I have a very supportive husband and wonderful kids, and we're a very close-knit family," she said.

So she tries to manage from home on the weekends. But these days, weekends are often taken up by rescuing banks. After the rapid and messy failure of IndyMac, Bair has spent several recent weekends orchestrating bank mergers so her agency won't have to run them: Washington Mutual sold to JPMorgan Chase and, a week later, Bair tried to arrange a shotgun marriage between Wachovia and Citigroup. Wachovia later accepted a higher offer from Wells Fargo.

But even as the government tries to shore up the banking industry, Bair has been outspoken about having to tackle the problem from the root by dealing with bad mortgages. She said more must be done to get lenders and borrowers to rework loans and ensure that more people will stay in their homes. Government can and should spend part of its $700 billion rescue package to create incentives to do this, she said, or risk a worsening economy.

Bair said she recognizes this will be deeply unpopular with people who have responsibly paid their mortgage.

"Yes, maybe we're helping somebody who shouldn't have taken that mortgage — maybe they should have known better," Bair said. "But at the end of the day, it's in our collective economic interest to get those mortgages fixed and keep those people in their homes."

Before becoming chairman in 2006, Bair taught at the University of Massachusetts at Amherst. She is also a former assistant secretary of finance for the Treasury Department and a former commissioner of the Commodity Futures Trading Commission. She also worked for former Kansas Republican Sen. Bob Dole, whom she calls a mentor.

During her time away from Washington, Bair authored two children's books, including Rock, Brock and the Savings Shock, a story contrasting the fates of a diligent saver and a profligate spender.

She laughs at the suggestion the book should be required reading for the country. "It might help. You know, I think kids are interested in this at an early age. And the other nice thing is that parents frequently read the books with the kids, so maybe the parents pick up something, too."

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