Top Bank Regulator Says Bank Recovery May Lag

By Leah Valencia, The University of New Mexico- Talk Radio News Service

Top U.S. Bank regulator Sheila Bair, chairman of the Federal Deposit Insurance Corp, told Congress that bank recovery may take longer than expected.

“While we are encouraged by recent indications of the beginnings of an economic recovery, [bank] growth may still lag behind historical norms,” Bair said during a hearing with the Banking, Housing and Urban Affairs Committee.

According to Bair, bank failures will remain high because household wealth loss was so pervasive and the general economy is weakened.

Bair urged policymakers to begin thinking about exit strategies in regards to their interventions in the financial markets.

“While these programs have played an important role in mitigating the liquidity crisis that emerged at that time, it is important that they be rolled back in a timely manner once financial market activity returns to normal,” she said.

Bair and other witnesses advised against the merging of regulatory committees.

“We are very concerned about this, I think it could weaken FDIC. It could overall weaken banking regulation.”

Bair said that although banks have come a long way in repairing the balance sheet, she cautions that restoration will continue into the next several quarters.