Federal Deposit Insurance Corp. Chairman Sheila Bair's last scheduled address to the American Bankers Association turned heated this week.
Although Bair and the ABA have often been at loggerheads over regulatory reform, the distance between the two was never more apparent, with the FDIC chief delivering some blunt responses to the trade group's relentless criticism of the Dodd-Frank Act.
"Is the constant engagement with the industry going to be [about] regulations you don't like? Are there ever times when you can acknowledge what regulators have done that have helped the stability of the industry, what the FDIC has done, what frankly Dodd-Frank did?" Bair said at one point Wednesday.
Bair's prepared remarks for the trade group's Washington summit were characteristically direct, challenging the ABA's view that Dodd-Frank should be overturned.
"As this historical era unfolds, public opinion as to the role played by the banking industry seems unlikely to be neutral," she said. "It is far more likely that banks will come to be viewed either as a group that supported the restoration of free enterprise and public responsibility in the American economy, or as a group that mainly looked out for its own short-term interests and resisted reforms that could have restored a sense of confidence and fairness in our financial markets."
But the room grew tense during the question-and-answer period. Bankers argued that Dodd-Frank was hamstringing their operations, while also voicing objections to the FDIC's recent guidance on overdraft protection, which requires banks it supervises to engage customers who meet an annual minimum of overdraft payments about alternative options.
"The only thing that the new regulations are doing for us is increasing our costs," one banker said.
But Bair drew a vocal reaction when she said the regulatory reform law focused mostly on large institutions. "Dodd-Frank is almost completely targeted at large financial institutions," Bair said.
In response, many in the audience grumbled, with some exclaiming, "No." Bair said small banks were exaggerating the negative effects of the law.
