Expert Discusses Great Recession at Dartmouth

Hanover — Ten years after the worst financial crisis since the Great Depression, a top official who was at the forefront of the federal effort to avoid another 1930s catastrophe expressed concern this week about trends that could spell more trouble ahead.

Sheila Bair, former chairwoman of the Federal Deposit Insurance Corporation, helped the U.S. navigate the crisis with two Dartmouth College graduates — former U.S. Treasury Secretaries Hank Paulson and Tim Geithner — along with then-Federal Reserve Chairman Ben Bernanke.

Bair told a Dartmouth audience on Tuesday evening, “There is too much debt ... not enough capital cushion in the banking sector to deal with the next (economic ) downturn.”

Bair also raised concerns about “massive student debt that now totals $1.3 trillion” and “short-sighted politicians in D.C.,” coupled with “powerful financial industry lobbyists working to roll back regulations.”

In May, Congress approved, and President Donald Trump signed, legislation to free thousands of small- and medium-sized banks from strict rules that had been enacted as part of the 2010 Dodd-Frank law to help prevent another meltdown. Although the bill does not weaken the regulatory regime put in place to prevent the country’s largest banks from assuming undue risk, it does represent a significant lowering of Obama-era rules governing a large part of the banking system. The non-partisan Congressional Budget Office recently projected that the annual federal deficit will top $1 trillion in 2020 and the national debt will reach more than $33 trillion in 2028. At that point, the debt will nearly match the size of the overall economy, the highest level since World War II.

Bair, a 64-year-old native of Independence, Kan., portrays herself as a lifelong Republican with a populist streak.

She was among the first to flag potential problems among banks, giving warning as long ago as 2002 about sloppy mortgage lending and lax regulation. Time magazine labeled her “the little guy’s protector-in-chief.”

She was awarded a John F. Kennedy Profile in Courage award, and Forbes twice named her the second most powerful woman in the world. She wrote about her five years at the FDIC in the book Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself. The FDIC, created as an independent agency of the federal government in 1933, provides deposit insurance for U.S. commercial banks and savings institutions.

Bair, who also has written two children’s books, related a story about meeting with elementary school pupils in Maryland.

“One little girl asked me, ‘If you are the second-most powerful woman in the world, who is the first?’ (German Chancellor) Angela Merkel . ... Later I was ranked 14th, just behind Lady Gaga,” she said.

Bair, who earned a bachelor’s degree in philosophy at the University of Kansas in 1974 and a law degree from the University of Kansas School of Law, was a longtime aide to U.S. Sen. Bob Dole, R-Kan. She said in an interview that although this was her first official Dartmouth visit, she and her husband have done several bicycling trips throughout the Upper Valley.

More than 100 students, faculty, community members attended what was billed as a “conversation” in the college’s Filene auditorium. Bair took questions from Peter Fisher, former undersecretary of the Treasury, senior fellow and clinical professor at the Tuck School of Business, as well as from the audience. The event was sponsored by the Rockefeller Center.