FDIC Chairman Discusses Federal Debt
VELSHI: Taxpayers could be getting an early Christmas present in the form of 2011 and 2012 tax cuts, or at least the extension of existing tax cuts. But as we have been discussing, there are some very tough decisions to be made about reducing the deficit and ultimately the debt. Deficit hawks warn that the cost of doing nothing or even doing what the president and Republicans have compromised on may be another financial crisis, maybe bigger than one that any of us have ever seen. One person concerned about the deficit is Sheila Bair. You'll know her as the chairman of the Federal Deposit Insurance Corporation, the FDIC, but also because she's someone who's been selectively vocal about other issues beyond that of just banking in the United States. And we appreciate that, Sheila. You're not like some in Washington always talking about stuff. When you talk, people listen. Let's talk about the deficit. You are concerned that we really should have started working on this deficit now?</s>SHEILA BAIR, FDIC CHAIRMAN: Yes, we really do need to get a plan, a critical plan in place in this Congress. It can be phased in over the next several years. But I think it's important for the international community and particularly the investor community to understand that we do have a sound path to fiscal responsibility. We don't have that right now.</s>VELSHI: It is my sense in a Americans would embrace a tough path if they knew where it led.</s>BAIR: Yes.</s>VELSHI: Right now we have a lot of rhetoric out there, we have people saying many this deficit, we're passing on to our grandchildren, which I don't thing means anything to most people, and others saying you can't tackle the deficit during these economic times. We've had the commissions offering some hard choices to reign in our long term deficit. Which of those choices do you think we need to consider embracing?</s>BAIR: Well, I think it needs to be a credible plan. I think the Bowles-Simpson plan is a credible plan. I think it's a good example of how bipartisan agreements could be achieved. There are other plans. Paul Ryan has a good plan. That might be more to the ideological preferences of some. But I think that's not really the question. The question is where can we found common ground in the middle to approve a package. So I think it needs to be evenly distributed, fair, credible and real. I think the deficit commission, the recommendations are very credible and certainly ones that we could support. But again, it's just important that this be dealt with in my meaningful way.</s>VELSHI: They're offering up talking about reductions in mortgage interest deductibility. They're talking about Social Security. increasing the age at which you get that. They sort of offered something for everyone to be angry about.</s>BAIR: That's right.</s>VELSHI: Should we be really saying this is realistic? We need to move in this direction?</s>BAIR: I think we should, and I think there's several area where's there's already good support. For instance, getting rid of all the special deductions and exemptions, trying to get rid of most of that and lowering everybody's rates and picking revenue in the process. I think it would be a tremendously beneficial to tax fairness and equity as well as long term economic sustainability. So things like that have a good bipartisan support already. Many of the changes in Social Security, I think, even public polls are showing that people would support removing or raising the cap on the income that is subject to the FICA tax now. So there are a number pressures that already have a good support. And hopefully they can put together a package that's at least within the $4 trillion ten- year range, which is what Erskine-Bowles did propose. But it needs to be done. And there could be real world ramifications. It's not just the logic debate about whether ramifications matter. There could be real costs for consumers, the government, for banks if this isn't dealt with in meaningful credible way in a fairly short term.</s>VELSHI: One of the things you gained a lot of acclaim for is where we didn't think everybody had a handle on what was going on. You certainly had your finger on the pulse of banks in this country. So I assume that you and your colleagues have the best sense of what's going on in banks. Have you lost any sleep over Julian Assange and WikiLeaks talking about having enough information to bring down a bank or two?</s>BAIR: Well, you know, listen. I think it's always important for everybody to understand deposit insurance and understand if you're fully insured, you have nothing to worry about. And we have a special website, myfdicinsurance.gov, that explains our rules. I think if you want to learn more about banks, there are reliable sources of information. Our websites have a lot of information about banks. There are credible analysts out there. So I would look for reliable information about the banking sector and understand if you're below our insurance deposit limit you're fully insured no matter what.</s>VELSHI: You think it's likely that there are information about banks that you don't know.</s>BAIR: No, I don't. I said this before. I can't imagine what could be out there that they think would have such a big impact. It sounds like it's old information, whatever it is. I have to tell you, I just ignore that kind of thing. I think people are trying to stir up trouble. It's not particularly constructive. I would ignore it, and I would hope other people would do the same. Look for credible sources of information if you're interested.</s>VELSHI: Sheila Bair, always a pleasure to talk to you.</s>BAIR: Nice to talk to you, Ali.</s>VELSHI: Sheila Bair is the chairman of the Federal Deposit Insurance Corporation, the FDIC. Imagine living on $190 a month. Now imagine doing that in retirement. This actually could become a reality for Americans if things don't change. I'll talk to you about it afterwards.