FDIC’s Sheila Bair Calls Liquidity Crisis Over

FDIC Chairman Sheila Bair has been speaking today at a luncheon at the Economic Club of New York today.  While there were many more things noted, there are two standout issues that she said which may dominate the headlines this afternoon and even tomorrow morning.

She offered a statement which may raise some eyebrows when you consider how the loans and availability of funds for the public from banks and lenders have remained under question because banks and institutions have been having to put up good capital to offset the billions and billions of bad assets still on their books.  Yet she stated quite simply, “The liquidity crisis is over.”  She then went on to discuss that the government has had to go into operations that it does not want to be in and went on to call this stage of the banking assistance as being in the clean-up phase with new tools being needed.

Bair also noted that this notion of “too big to fail” is a policy which should be thrown into the dust bin.

While the stress tests recently applied to the banks with over $100 billion in assets, Bair did note that smaller banks should not be subject to different tests than larger banks.

In the Q&A she said that the longer the bad assets are left on the books the more uncertainty that they face, but she also said that banks are now well positioned for the long run.

We will follow up if Sheila Bair makes more potentially market-moving or bottoming out calls.

UPDATE AT 1:07 PM EST: Bair was also asked about a bank holding company being able to repay its TARP money at their own discretion.  On this issue she was not at all hinting that the banks should be able to arbitrarily give this back.  Bair said this should be done in consultation with the regulatory oversight bodies as many banks feel their books are far healthier than the way others may consider their books.

JON C. OGG