Sheila Bair continues to be mad that she didn't get to sit at the grown-ups' table during the financial crisis, and she told Joe Nocera all about it in his much-talked-about "exit interview" this weekend. She-Bair is not afraid to bring the awkies regarding her relationship with Hank Paulson: “Except for a 10-second handshake, she never even spoke to Henry Paulson her first year or so in office.”
Wait, what? Sadly there are no more details about this 10-second handshake, but we imagine it got pretty creepy. Hank probably started crisp and confident, but by the five-second mark both hands were clammy and eventually Bair had to clear her throat noisily a couple of times and say “crushing my hand here Hank.”
Now, sure, the Bair didn't like getting snubbed by Timmy and Hank just because her whole agency had to share two computers for most of her tenure. But she has no problem with elitism per se, and doesn't think government money should be given to just any bunch of losers:
“Let’s face it,” she said. “Bear Stearns was a second-tier investment bank, with — what? — around $400 billion in assets? I’m a traditionalist. Banks and bank-holding companies are in the safety net. That’s why they have deposit insurance. Investment banks take higher risks, and they are supposed to be outside the safety net. If they make enough mistakes, they are supposed to fail. So, yes, I was amazed when they saved it. I couldn’t believe it. When they told me about it, I said: ‘Guess what: Investment banks fail.’ ”
And second-tier investment banks should fail in second-tier ways, like crashing a Segway, or throwing up from drinking peach schnapps, or dying of an allergic reaction after a little light bestiality.
There's lots more in the fascinating interview, which depicts Bair as principled, no-nonsense, and proved right by events. As Nocera notes Bair has long been viewed as "difficult," her reputation dragged down by Andrew Ross Sorkin's reports that Tim Geithner and Hank Paulson viewed her "as a showboat, a media grandstander, a politician in a regulator's position whose only concern was to protect the FDIC, not the entire system."
But Bair's market-discipline approach, and her view that bondholders should suffer for investing in insolvent issuers, are getting more respect these days. And with the Bair's book dropping in 2012, a little love from Joe Nocera seems well timed to help her in her next act.