Former FDIC head Sheila Bair to chair Fannie Mae board

Sheila Bair, the former head of the Federal Deposit Insurance Corp. during the 2008 financial crisis, will chair the board of the government-controlled mortgage giant Fannie Mae beginning Nov. 20, the company announced Wednesday.

Bair joined Fannie’s board in August 2019. Her fellow directors unanimously elected her the successor to Jonathan Plutzik as chair, though Plutzik will remain on the board. The selection comes as Fannie — under the guidance of its regulator, the Federal Housing Finance Agency — is attempting to exit conservatorship, where it has lingered since its bailout in 2008.

“Sheila is the perfect person to lead the board and help guide the company as we continue to transition out of government control,” Fannie Mae CEO Hugh Frater said in a statement Wednesday. “She will help chart a course forward for the company while making sure we never forget our mission to support mortgage financing in a safe and sound manner.”

Bair had long been a critic of the structure of Fannie and its brother Freddie Mac going back to her role in the George W. Bush administration. While she has acknowledged the important role the two government-sponsored enterprises play in buying mortgages and selling them in securities to investors with an implied government guarantee, she has pushed for Congress to decide their permanent fate.

“Our future financial stability demands that we deal with these implicit liabilities head on, and limit the ability of private companies to take risks at the expense of the taxpayer,” Bair said in a 2010 speech as the chair of the FDIC. “In the case of the mortgage GSEs, there are a variety of options for making some of their functions governmental while putting others in private hands. But what we cannot do is perpetuate their quasi-governmental status, which privatizes gains and socializes losses.”

Fannie Mae has paid $181.4 billion in dividends to the Treasury Department after drawing $119.8 billion in bailouts as of Sept. 30, according to the company’s latest financial results. After years of stalled legislation to reform Fannie and Freddie, the FHFA and the Treasury announced a suspension of the dividend payments while the companies are allowed to rebuild their capital reserves in preparation for exiting conservatorship administratively.

“Sheila’s deep well of experience will provide strong leadership as Fannie Mae works with the Federal Housing Finance Agency to exit conservatorship while simultaneously fulfilling our mission to provide access to safe, affordable mortgage financing,” Plutzik said in a statement Wednesday announcing Bair’s new position.