IDEAS: Given the forces arrayed behind finance, where do you think the counter-energy can come from?
BAIR: Well, that was one of the reasons I went out and campaigned for Elizabeth [Warren]. I’m kind of a deficit hawk, so I agree with progressives on the financial reform issues and on other things I don’t....But at the end of the day, I have 100 percent confidence in her that she’s going to do what’s right. She’s not going to be influenced. And I think there are others. Susan Collins, to pick a home-state senator: One of the most important points in Dodd-Frank was the Collins amendment to improve bank capital requirements. And that was something that, ironically, [Treasury] Secretary [Timothy] Geithner had resisted....So there are people out there; we need more of them.
IDEAS: In your book, you say you’d like to see tighter rules on the jobs people can take after serving as regulators in Washington.
BAIR: Absolutely. I would have a lifetime ban on working for anyone you’ve regulated. A lot of people say, Oh, that’s terrible. But you know what? It’s a big financial services sector. First of all, you can be an academic, you can work for a policy institute. Or you can work in a different area of financial services. But to actually go work for a bank you regulated? No! My gosh, no!
IDEAS: If you were going to advise a bright college kid who was interested in the economic system and wanted to improve things, where would you tell him to go work?
BAIR: Well, there are good banks out there....Not all the banks were problems; some of them were solutions. I think for the most part, the regional banks, the mid-sized banks, managed well; there were a few of them that had trouble, too. And then the community banks, less than 5 percent of them failed, and they were actually doing a better job lending during the crisis. So, go to well-managed banks....But I think regulation and government is a noble career, and a noble path. And I think another thing we need to do post-crisis is to reestablish the equilibrium between regulators and the industry. In the go-go years leading up to the crisis, regulation really got a bad name.
IDEAS: Do you think that part of it is that government in general is being demonized? How could we change that balance?
BAIR: It is, it is. And regulators feed into it when they accommodate the industry with all these exceptions and rules, or when they go work for the industry after they leave....So trying to increase the status of the regulatory community, for examiners especially, I would pay them more, I would give them training...I would have exchange programs with other regulators, with foreign regulators. There are all sorts of ways you could make a career as a lifetime examiner, one that would be really interesting and meaningful and engaging for really smart people. But that should be their career. They shouldn’t become examiners just because they think they’re going to get triple their salary going to work for a bank later on. They just shouldn’t do it. And I think that would enhance their stature with the public, too, if the public saw those kinds of dedicated people.