When the 2008 financial crisis hit, Sheila Bair was running the Federal Deposit Insurance Corporation — the agency that guarantees bank deposits and manages bank failures. Her job was to protect depositors and maintain confidence in the banking system. What she actually did, and how hard she fought to do it, is one of the more instructive stories of the crisis period.
Bair was a Republican appointee who clashed repeatedly with Democratic Treasury Secretary Timothy Geithner and Federal Reserve Chair Ben Bernanke over a central question: when banks made bad bets and failed, who should bear the losses — shareholders and creditors, or taxpayers? Her consistent answer was shareholders and creditors. The answer coming from Treasury and the Fed was more often: taxpayers, in the form of bailouts.
The disagreements were public, sustained, and consequential.
Background and Political Career
Sheila Colleen Bair was born on April 3, 1954, in Wichita, Kansas. She attended the University of Kansas, where she earned a degree in philosophy, and went on to earn a law degree from the University of Kansas School of Law in 1978.
Her early career was in Republican politics. She worked as a counsel to Senate Majority Leader Bob Dole in the 1980s, handling financial regulatory issues. She was a true Republican in the Dole mold — fiscally conservative, skeptical of government bailouts, focused on protecting ordinary citizens from financial industry excess.
She served at the Commodity Futures Trading Commission under President George H.W. Bush, then spent time in academia and the financial industry before returning to government as Assistant Secretary of the Treasury for Financial Institutions under President George W. Bush from 2001 to 2002.
FDIC Chair
President Bush appointed Bair as FDIC Chair in 2006. She was confirmed by the Senate and took office in June of that year — just over two years before the financial system began unraveling.
The FDIC’s core mission is deposit insurance: guaranteeing that depositors at insured banks can recover their funds up to the coverage limit even if their bank fails. When banks fail, the FDIC manages the resolution process — finding buyers for failed institutions, paying out insured depositors, and liquidating assets to recover as much as possible for uninsured creditors.
During Bair’s tenure (2006–2011), the FDIC handled the failures of more than 300 banks, including Washington Mutual — the largest bank failure in US history at the time. IndyMac, one of the largest savings institutions in the country, failed in July 2008 and was managed by the FDIC through an extended receivership.
The Bailout Battles
The heart of Bair’s significance in 2008 was her resistance to the prevailing approach of using government funds to prevent losses from falling on bank creditors and shareholders.
Her most prominent disagreement was over Citigroup. When Citigroup teetered in late 2008, Treasury and the Fed structured a bailout that protected Citigroup’s bondholders and shareholders from significant losses while injecting taxpayer funds. Bair argued that the FDIC’s resolution tools — developed precisely for situations like this — could have managed Citigroup’s failure or restructuring with losses falling primarily on creditors rather than taxpayers. She was overruled.
She also pushed back on the design of the Home Affordable Modification Program (HAMP), arguing that the program as structured did too little to actually reduce mortgage principal for underwater homeowners and served bank balance sheets more than struggling borrowers. Her position proved accurate — HAMP’s uptake and effectiveness were far below projections.
These disagreements are documented in her memoir and in extensive contemporary reporting. She was not a marginal voice; she ran one of the four primary federal banking regulators and had statutory authority the Treasury did not.
Bull by the Horns
Bair’s memoir, Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself, was published in 2012. It is a detailed account of the internal regulatory battles of the crisis period and one of the more candid books written by a participant in those events.
The book was notable for naming names and being specific about who advocated for what positions — unusual in a genre where former officials typically soften their accounts. Her criticism of Geithner was direct. Her criticism of the major banks’ resistance to genuine mortgage modification was equally direct. The book received attention both for its policy substance and for the frankness of a Republican official who had served the Bush administration offering sustained criticism of the Wall Street bailout structure.
After the FDIC
Bair left the FDIC in 2011 and has remained active as a writer, board member, and policy commentator. She has served on the board of directors of several financial companies, written extensively on financial regulation, and continued to advocate for stronger capital requirements and resolution frameworks that protect taxpayers rather than bank creditors.
She has been consistently willing to criticize both parties — backing aspects of Dodd-Frank while arguing it didn’t go far enough on capital requirements, and criticizing Republican rollbacks of financial regulation as shortsighted. Her consistent frame is protecting ordinary depositors and taxpayers from absorbing losses generated by financial industry risk-taking.
Frequently Asked Questions
What is the FDIC?
The Federal Deposit Insurance Corporation is the federal agency that insures deposits at US banks and manages the resolution of failed banks. Deposits are insured up to $250,000 per depositor per institution. The FDIC was created in 1933 following the bank failures of the Great Depression.
Was Sheila Bair a Republican or Democrat?
Republican. She was appointed FDIC Chair by President George W. Bush in 2006. Her earlier career included work as counsel to Republican Senate Majority Leader Bob Dole and as Assistant Treasury Secretary under Bush.
Why did she clash with Timothy Geithner?
The central disagreement was over who should bear losses when major banks failed or required restructuring. Bair consistently argued that creditors and shareholders should absorb losses through the FDIC’s resolution process. Geithner’s Treasury generally favored protecting creditors as necessary to prevent systemic contagion, which Bair believed resulted in taxpayers absorbing losses that should have fallen on investors who took the risk.
What was Washington Mutual’s failure?
Washington Mutual was seized by the FDIC on September 25, 2008, following a bank run that drained $16.7 billion in deposits over 10 days. It was the largest bank failure in US history at the time. The FDIC sold WaMu’s banking operations to JPMorgan Chase the same night for $1.9 billion.
What did Sheila Bair write?
Her memoir, Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself (2012), documents her experience at the FDIC during the financial crisis, including detailed accounts of internal regulatory disagreements. She has also written The Bullies of Wall Street (2015), a version of the crisis story aimed at younger readers.
