political establishment have a little bit of egg on its face on the day after election day. host: and ray, the last word. guest: well, i don't know whether we'll have egg on our face but i think it probably will tend to be a little closer than we think it might be right now. a lot of these things do tend to tighten up as the race comes to a conclusion. and on the democratic side there will be a lot of push to get out the vote and that sort of thing that will tighten some of these things ufplt. but i still think, particularly in our area and ohio that republicans are going to find themselves in a much better position come november 3rd. host: ray is the edtore page editor for the cincinnati enquirer joining us in that city. and tony norman, the associate editor joining us from pittsburgh. thanks for being with us and sharing your perspective with our c-span audience. guest: thanks. guest: thank you. host: the president is beginning this week in ohio with a couple of campaign

rallies, then maryland for an event tomorrow. the president then travels to a number of states beginning with a rally in seattle on thursday for senator patty murray. on friday, campaigning for senator barbara boxer and then on to nevada where he'll attend a campaign event. and then wrap up the week in minneapolis and also the democratic congressional campaign committee fund raisers. . .

>> next, "newsmakers". with sheila bair. after that former secretary of state, condoleeza rice. >> this week on c-span's "newsmakers," sheila bair. one of government officials who will be responsible for implementing the new dodd-frank

regulation laws and to address the mortgage crisis currently facing our country. here's to question here, tom of the financial times newspaper. mr. brinkly first question? >> chairman bair. we are in the middle of a foreclosure crisis. to what extent is this a failure of regulation? >> well, i think it's a very good question. um, you know, it turns out this was an issue-wide presidency with large servicers. the banks were the primary supervisor. we have been collecting information that you have not been implicated in this. that's because they have small portfolios. it was really a symptom of size. it's very unfortunate. so in our back up policy.

we have been told this is a process issue. that all the information is in the file. the person who needed to sign the affidavit had not been looking at the file. we need to independently verify that and make sure good title is in these files. the adequate staffing is provided so there's full compliance with the state law. foreclosure is a very serious thing. and that, you know, the files are fully documentd and it's a good case to move forward. we need to verify that. we know it's a process issue. not that anybody should jump to conclusions until we completed our review process. >> you are the primary regulator. this affects the largest banks.

you do insure these banks. >> i think, as back up supervisor, we are working with the fcc and the fed. my personal opinion is they have do serious risk and regulatory risk and state has an issue to do their own investigative process. we need to get a full handle on all of these issues. if this is just a process issue, i don't anticipate the exposures to be significant. if it's more fundamental, we will have to deal with that. we need to get all information before we jump to conclusions. i certainly don't think people should be viewing this as a broader problem until we have

the facts. >> you're not someone that wants a nationwide moratorum? >> it's important to might have forward, those should be halted until the files are reviewed for all pertinent information with all files are executed. all those processes need to be in place. once that has occurred, no, some of it is investor-owned property. we want to make sure all processes have been followed. it may well be the case that 12 to 18 months that payment has been made. it's necessary to move on with that. it's tragic. i don't like it.

even in the family can't make a modified payment, something else has to happen. i regret it, but that's the way it has to work. >> this week, the first step in terms of writing the rules how creditors and people who lend money to financial institutions will be treated. i am wondering, how does fdic think they will be able to take over? will you swoop in on friday and open it up again on monday? how do you make it worse by showing the government can just take over? >> those are very good questions. i think part and parcel of the liquidation planning. any bank holding company has to

build resolution plans acce acceptable to us and the fed. so we should have plans in advance on the shelf. those will be updated and monitored. we are getting up a new office that will be staffed with experts and larger constitutions. they are a national operation that will work on an on-going basis. we will have a plan on the shelf if something happens. i think with the lehman situation, they are of the size. there was at least one ready buyer for the bulk of lehman, i was told, i wasn't involved in this because of regulatory terms and what kind of credit risk would be taken on.

i think the faa had been concerned about that and a sale didn't go through. we could have worked with the authority to address their concerns. we can hold back the unsecured debt and bad assets and market it and sell it quickly if you have ready buyers. we also, i think, you know, we have the ability to move the institution into a bridge institution. we have the ablity to do that if you couldn't arange an immediate sale. those tools are in place that we have used with banks. i don't want to underestimate the difficulty of this. it's never going to be, whether bankruptcy or whatever, these tools are so far superior to

what we had going into the crisis and the a lot to advance plan, work with international regulators. that's something the fdic can do and can go in soon. it's a much more superior process than we had before and so, losses on unsecured shareholde shareholders. >> on tuesday, there was a huge uproar when it was taken over. do you envision a situation to take over a company by par? >> no. so, i suppose you could have a

situation, for instance, if the institution had a big -- generally collateralize. your collateral is going to be marked at market value. you may want to maintain those customer relationships. they can pay enough of a premium so, that, i think we talked about that a few days ago. it was a mathematical determination. they would be subject to loss. and make sure they have adequate collateral. >> chairman bair, are you satisfied with how dodd-frank addressed derivatives? >> i do.

i think there's a lot of implementation work with capital requirements and try to mutual this to regulated changes. there's a lot to do to implementation. this is the ses. i think they have been good at reaching out to us. they have the read on the derivative pieces of this. i have a lot of confidence in the regulatory process. the vigor with which we proceed. >> this is c-span's "newsmakers" program. chairman of the fdic. tom of the financial times are hear as our reporters. next question. >> i just like to ask, the financial stability over sight council was created.

this has you sitting aside timothy geithner, i wonder if this includes the credit union, i wonder in times of crisis how this war council will be with all these people around the table. >> right. well, not all of them are voting members. even if they were, i think, there's one lesson i learned during the crisis. people with diverse viewpoints can come together and make a decision and make it quickly. we have done it over and over again with our own process. that is a fairly elaborate process requires a superior majority of the secretary of treasure with the concurrence of the president. those decisions got turned around quickly.

when the situation calls for it, it can be addressed. i being with anything, you need a balance. then i'm not worried about. i think if a crisis situation, we can come together. if i have a concern >> it's about the rule-making process and there's a lot of elaborate processes. it's always good. at what point does that facilitate reform? if there's so many people you have to talk about. that's where we have to work to make a performance decision. >> you delayed the rule that deborah wanted because the treasury wanted more time. it's not in a position it could be. >> we were happy to delay it. we did and proceeded. i think everyone would agreer not. if they have enough time to read

it and give us their input. it worked. >> not perfectly. we required, there had been several weeks worth of staff discussions. i provided ten days to that and we add another week. i was happy to do temperature i think we will like to develop some standardized procedures to consultation so everyone knows. i think all we hope to get our hands up. if someone has an interest in our rules or whatever. it's incumbent on us to get our hands up and get them in the loop. not this last-minute kind of thing. we need to make sure that doesn't happen >> chairman ben bernanke said one of the things the fed is going to have to do, is figure

out which companies should be determined systemic. in other words, what companies could cause a broader financial collapse if they were to go down. and i'm curious, to someone who was early to seeing problems develop in the mortgage market, do you see a need to -- these hedge funds, what criteria should be useed to determine those firms? >> i don't know to be too definitive, but i think generally speaks, it's about interconnectedness. what would be the broad ramifications? those should be focused on the cred

creditors. just the fact that the financial institutions that hold their debt, that should not be the criteria. there's too much internalization of resque. that's something we need to deal with now >> do you expect this will be a small group of companies? >> i think it's really too soon to will. i think it's too soon to tell. we're working more. since we're only regulate banks, we have authority over bank holding companies as well. i think it will be a learning process for members in making that determination. >> chairman bair. how prevalent do you think your view is? >> you know, i think there's a general sense that it's about interconnectedness. they define it in a different

way. the financial institutions will take losses. we need to look broadly about the real economy. so i, that's my view. i'm not going to speak for others. it will be a collaborative process. it's not driven by individual regulator >> looking back at this crisis. at who point could this have been stopped? >> i think in the early 2000s. applying to banks and nonbanks. and it didn't happen. they were efforts in congress, and that didn't happen either. one of the reasons this happened because of the political push back. everybody was making money.

they were getting cash off re-fis. it was difficult as home prices went up and the tremendous amount of volume to take away the punch bowl. hopefully collectly we will have the will to take away the punch bowl. it will be politically unpopular decision. >> how often are you in contact with ben bernanke? >> we have lunch and see each other it's meetings. he's attending the fsoc

meetings. i have a lot of respect for ben. >> tom. >> um, i want to ask you about something that happens every weekend. go into banks and close them and sell off the assets. how basically a process is this for the communities? and how far through this difficult time are we? there's 130 or so banks closed in this way? >> that's a good question. it's never a happy thing for a bank to be closed. like foreclosure, it's a necessary thing when banks are no longer viable. it doesn't do anyone any good. and we learn through the s&l

process. they become no longer viable. it needs to happen. almost all the resolutions are what we call whole bank with law share. we are able to get them to a healthier bank to protect the deposits and acquire the assets to maintain the relationships. it will be a borrower. we try to provide continuity with loss share transactions. they have worked pretty well. a lot of community banks are being helped. so i think that strategy has worked well for us and it will mute the impact to a community. >> are we through the worst of it? >> all the indicators, yes, we're turning the corner this

year as we thought we will. they will peak this year. we had 140 last year. not a whole heck of a lot more and our losses will be lower. the banks being closed are smaller. our deposit is still in negative. but improving. banks, we're working through commercial real estate loans and as they do that, they will be in a stronger position to lend into the economy. yes. i think there are a lot of uncertainties about the economy. we think it will continue to recover. >> just explain the state of this fund. this is obviously what deposit is so concerned about. they want to know they are completely safe >> there's a difference between our fund balance, which is a statement of our net worth and our cash balance, which is quite

robust. we have substantial authority to borrow from treasury. there's plenty of cash on hand. the reason we have a negative is because we reserve 12 months out. our cash balance is $45 million. >> one of the big questions, can this happen again? we have all these rules as part of dodd-frank. if there's another day of reckoning, the banks can withstand it. the banks are saying, enough is enough. if you require us to have more reserve. there's recently an agreement to hold more in reserves. how far is too far? the banks write this can have an

overall impact on the economy. >> the u.s. banks have been making this argument. if you deduct all the instruments they are still about 6%. you're talking about -- granted their assets are going to grow. but, over time, they can deal with that problem by selling those bad assets off. going from 6% to 7% is not a lot. our estimates are within a few years of retained earnings, they can get to easily get to above 7%. so, i don't buy that. you know, you can retain earnings. you can decrease your bonuses.

a lot of things to do to conserve. a lot of things to do to build capital without cutting back on lending. the place is a wash it cash. whether it's 7%. 8%. there's still plenty of lending capacity. to get that going better. we need better borrowed demand and that's going to dependent depend on confidence in the community. i think needs to be tightening up of credit standards. we have shifted too far in the other direction now. the smaller banks have stayed stable and picked up a little bit. the large banks that you see decreases quarter after quarter. i hope we see a bump up in the third quarter >> do you think we need to go higher? >> i do think for very large

institutions, i think it should be higher than 7% >> do you have a number in mind? >> i don't. i don't. it's the federal reserve board's call. the u.s. has been unified with the international community there needs to be a larger style because of the external rifts they create. whether we will get an agreement with the international community, i don't know. we're not on the fsb. i think we so anonimity here. >> chairman sheila bair is our guest of the fdic. our guest reporters, we have time for one more question each. peter. >> the $700 billion.

doesn't seem like it's going to cost much. does this mean people will say, well, we can get our money back if we do something a bit more on the open? >> we don't know what the final price tag is going to be. i think fanny and freddie need to be put to the equation. and nobody will be happier than me, their process projections come to fruition. the moral hazard created by this whole process. and to the institutions stabilize them, have been very damaging to our financial system, to market discipline in our financial system, and to frankly how the profit will use the financial system.

the government and the regulatory agencies. you know, i guess i would say, there are a lot of businesses as small banks and other types of businesses that could survive if the government backs them up until they get in their feet. if we embrace that as a policy, that's our market base system and that's a road i don't think we should go down >> there's a lot of anger. do you think wall street is to blame for this? do you think it's helpful to have it sort of antagonistic relationship between washington and the banks for better or worse really drive the financials? >> i think you should be careful of painting everybody with a

broad brush. there are small banks that did high risk taking not smart things and other banks that manage well. painting with the same brush is not helpful. in terms of customers of financial institutions, they should decide for themselves. that's one of reasons why it's important to have a diverse banking sector with smaller institutions so people have a choice. and, so no, i think we need to focus on issues and personalities. but clearly they were some of -- with the large institutions there was excessive risk taking and had a much more dramatic impact. >> finally, chairman bair, the courtses have gotten involved. is that frustrating for you? >> i don't. i don't think. i think it's a