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FDIC chairman Sheila Bair to step down in July, ending 5-year term

WASHINGTON — Sheila Bair is stepping down as chairman of the Federal Deposit Insurance Corp. this summer, ending a five-year term in which she helped craft the government’s response to the 2008 financial crisis.

Bair will leave her post as one of the government’s top bank regulators on July 8, the FDIC said Monday.

Bair was among the first officials to raise concerns about the explosion in high-risk lending to borrowers with bad credit. Under her tenure, the agency closed 365 banks since the crisis began. That included Washington Mutual, the nation’s largest bank failure.

The FDIC is charged with maintaining public confidence in the banking system. The agency guarantees bank deposits up to $250,000.

Vice Chairman Martin Gruenberg is considered a likely candidate to succeed her. He will become the acting chairman if the Obama administration doesn’t appoint a replacement before Bair leaves.

Bair was appointed by President George W. Bush in 2006. Within a year, she went after banks that issued some of the riskiest subprime mortgages.

In March 2007, Bair moved to shut down Santa Monica, Calif.-based Fremont Investment & Loan. The bank had been a major player in the troubled home-mortgage business, doling out high-interest loans to people with blemished credit records or low incomes.

By the end of her tenure, the agency closed the most banks since the savings and loan crisis.

Bair also earned a reputation for taking on some of the nation’s largest banks She pushed for big banks to pay a larger share of the fees that the agency charges to insure deposits.

In the past, banks paid based on the amount of deposits they held. Now, the fees are calculated based the loans a bank holds on its books. Larger banks tend to have more loans relative to their deposits.

At times, she clashed with industry executives and other regulators. But on Monday, many praised Bair for leaving the agency stronger than when she found it.

“We had our moments of cooperation and moments of frustration with Bair,” said Scott Talbott, a lobbyist with the Financial Services Roundtable, which represents the nation’s largest financial companies. But he said she provided “strong leadership during a tumultuous time.”

Bair, a native Kansan and longtime financial regulator, worked as a civil rights attorney in the 1970s and was a top aide to former Sen. Bob Dole, R-Kan. She launched an unsuccessful run for Congress in 1990, losing in the primary by less than 800 votes.

After working at the Commodity Future Trading Commission and as a lobbyist at the New York Stock Exchange, Bair joined the Treasury Department in 2001.

Bair’s work at Treasury foreshadowed her role later in in drawing attention to the subprime crisis. She worked on an early effort to combat predatory lending, but left after a year to teach financial regulatory policy at the University of Massachusetts in Amherst.

The FDIC says Bair will chair a final board meeting during the first week of July.