Sheila Bair says government intervention is needed—soon
As chairman of the Federal Deposit Insurance Corp.—the agency charged with protecting accounts at the nation’s 8,500 banks—Sheila Bair is knee deep in the government’s efforts to resolve America’s most harrowing financial crisis in a generation. She recently sat down with U.S. News to discuss the cancerous effect of home foreclosures and why she believes government should ramp up its efforts to prevent them. Excerpts:
Why does the foreclosure problem warrant government intervention?
I am increasingly concerned about the foreclosure rate and the potential for a downward spiral, where we have too much inventory, additional foreclosures adding to inventory, which forces home prices down, meaning fewer people can refinance—leading to more foreclosures and more downward pressure on home prices. If this downward spiral takes hold, there could be much broader ramifications for the economy as a whole. So I think we need to come to grips with the need for government intervention. It’s not politically popular. We just need to be honest with people that we have a significant problem here and that additional measures are going to have to be taken. And yes, it may cost money.