With Banco Santander’s appointment of former FDIC Chairman Sheila Bair as an independent director, the Spanish bank is getting a tough-as-nails former regulator who will be willing to tell the bank’s management what it needs to hear rather than just what it might want to hear. Unfortunately, too many too quickly criticized the move as the latest spin through the revolving door.
The truth is that we all need people with private sector experience in the public sector and we need people in the private sector with public sector experience. What we don’t need is influence peddlers selling out to the highest bidder to promote private interests to the detriment of the public interest and using their prior government service as the vehicle to do it. That destroys public confidence in government and government officials.
That’s why the revolving door narrative is just wrong here. Sheila Bair has a demonstrated record of doing what is right regardless of the circumstances. As chairman of the FDIC, she aggressively policed bad bank behavior. Under enormous pressure, she was willing to stand up for taxpayers and Main Street. She did what was right, not what was popular or easy or what other people wanted her to do. It is a good thing that a large global bank is willing to bring on an independent director who has a well-deserved reputation as a tough regulator and will provide a regulator’s view on its activities.
There is no question that the revolving door is a pernicious problem that has damaged public trust and confidence in government. Too many bank-friendly government officials have used their government positions to deregulate Wall Street or didn’t enforce the law against Wall Street. They then entered the private sector and peddled access and influence to the highest bidder, usually for loopholes, deregulation and the creation of an un-level playing field. Wall Street is the worst offender as it uses its economic power to buy political power to further increase their economic power. This vicious cycle benefits their private sector paymasters, but it is terrible for the public interest and public policy.
Wall Street CEOs all too often fill their boards with cheerleaders and rubberstamps. Sheila Bair is the exact opposite of such derelict directors. She is tough and experienced and will strive to be a watchdog in the boardroom. Wall Street and the big banks need more Sheila Bairs on their boards, not fewer.
Frankly, if JP Morgan Chase CEO Jamie Dimon was as half as smart as everyone says he is, he would have fought to get her on his board (not that she’d have taken it). That would show that all the PR and spin they are engaged in about controls/compliance/etc. might be real. But, not only isn’t he that smart, he doesn’t even have the self-confidence to tolerate anyone truly independent on his board. Banks and CEOs that do have that wisdom should be congratulated, not criticized.