Bair Looks into the Vault
The threat of sudden customer withdrawals can spook many a regulator during the course of their careers. But for Federal Deposit Insurance Corp. Chairman Sheila Bair, a fear of bank runs may stretch back to her childhood, when she nearly started one.
As she recalled in a speech to the Independent Community Bankers of America last week, Bair went every week with her father to Citizens Bank in Independent, Kan., to watch him deposit funds.
"As I would stand with him in the teller line waiting for our turn at the window, I would always stare in fascination at the big, shiny steel door of the bank's vault," she said at the ICBA's national convention in San Diego. "It had a huge, round metal handle with prongs like the steering wheel of a ship. I imagined that behind that door stood tall stacks of crisp green bills and piles of gleaming coins."
Bair's curiosity eventually got the better of her. During one visit, "I noticed that the vault door was open a crack. My heart raced. Someone had forgotten to close the door! Now was my chance to sneak a peak at the treasures within," she said.
With her father distracted, Bair made her way to the door. "But when I reached the vault and peeked expectantly into the small slit of an opening, I had the surprise of my life — no crisp greenbacks, no bags of shiny coins — just rows and rows of little metal drawers with numbers on them," she said. "'There's no money in the bank, there's no money in the bank,' I shouted, racing back to my father to forewarn him that someone had been absconding with his and other bank depositors' hard-earned cash," she said.
Her outburst, Bair continued, "created quite a stir among the long line of customers waiting to deposit their week's earnings," and even drew the bank's president to the scene to see what was happening.
"After giving me a few somewhat forceful pats on the head, he assured me that everyone's money was quite safe," she said. "He then invited me and my father into his office for a quick tutorial on reserve banking. I didn't understand much of it, except for the idea that most of the depositors' money was loaned out to others to help them buy things like cars and homes, which I thought was nice."
Hoenig to Retire Oct. 1
Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Friday he plans to retire on Oct. 1 after serving two decades as head of the regional bank.
Hoenig's retirement had been widely anticipated as he reached the Fed's mandatory retirement age of 65.
An outspoken anti-inflation hawk, his departure will remove one opponent to the Fed's current monetary policy. He strongly opposed the central bank's effort to boost the economy by keeping interest rates low for an extended period, as well as its decision to purchase billions of dollars in Treasury securities, known as quantitative easing.
He dissented against these policies at all eight Fed meetings last year.
The Kansas City Fed has set up a committee and hired a firm to help find Hoeing's successor.
Hoeing has been president since 1991 and is the longest-tenured president in the regional bank's nearly 100 year history. He is also the most senior participant on Fed's policy-setting Federal Open Market Committee.
"The recent financial crisis and its aftermath provided those outside the Federal Reserve with an appreciation for the vision, expertise and thoughtful analysis that has made Tom one of the most valued participants in central bank policymaking around the world," said Federal Reserve Bank of Kansas City Chairman Paul DeBruce, in a press release.
Daley Bows Out of Search
With the White House yet to name a Consumer Financial Protection Bureau chief, President Obama's top adviser checked out of the selection process last week.
As reported by numerous outlets, the administration said William Daley, Obama's chief of staff and the former Midwest chairman of JPMorgan Chase & Co., would stay clear of a role in the search. According to the Washington Post's story, Daley had managed lobbying for JPMorgan Chase at a time when the bank — like the industry at large — opposed creating the CFPB under the Dodd-Frank Act.
Published reports carried a statement by White House spokeswoman Amy Brundage saying while Daley would still "be involved in matters involving the CFPB," he "has chosen not to participate in the process of selecting a nominee for CFPB director." She said Pete Rouse, a counselor to Obama and the former acting chief of staff, was in charge of the search process.
The administration has been under constant pressure to find a director since Dodd-Frank was enacted in July. Elizabeth Warren, the Harvard professor who was the architect behind the bureau, has strong Democratic support to become the director. But her confirmation would likely face an uphill battle. She is now leading the formation of the CFPB as a White House adviser.
