Bair to step down as FDIC chairman in July

Sheila Bair, chairman of Federal Deposit Insurance Corporation, speaks at the Independent Community Bankers of America’s (ICBA) 2011 National Convention and Techworld in San Diego, California March 22, 2011.

WASHINGTON (Reuters) - Sheila Bair, one of the most visible regulators who navigated the recent financial crisis, will leave the Federal Deposit Insurance Corp on July 8, the agency announced on Monday.

Bair began her five-year term as chairman in June 2006 and was known for her tough talk against Wall Street excess. Throughout the 2007-2009 financial crisis that rocked the banking industry, she butted heads with other regulators by at times taking a firmer stance on taxpayer-backed bailouts.

On Monday, Bair did not announce what she will do next. She previously said she plans to go back to academia or work at a nonprofit, but not enter the lobbying world or Wall Street.

Prior to joining the FDIC, Bair was a professor at the University of Massachusetts-Amherst. She has held a variety of jobs in government, including being a top aide to former Senate Republican leader Robert Dole.

The Obama administration has yet to announce who the president will nominate to replace Bair, but a leading candidate is FDIC Vice Chairman Martin Gruenberg, according to industry and congressional sources.

Gruenberg has been at the FDIC since 2005 and before that was a longtime Democratic aide in Congress, where he focused on banking issues.

Bair has been an outspoken advocate of strongly implementing the Dodd-Frank financial oversight law, which was enacted in July.

Under the new law the government can designate non-bank financial firms as being systemically important financial institutions, or SIFIs, because their failure could roil markets and damage the economy.

The FDIC has the authority to wind down or liquidate these failing firms.

Last week, Bair said policymakers must convince markets that no institution is too big to fail and that the government will never again bail out major financial giants like it did in late 2008 during the financial crisis.

"This situation can only be regarded as a new and dangerous form of state capitalism, where the market assumes large, complex and powerful financial companies are in line to receive generous government subsidies in times of financial distress," she said at a banking conference sponsored by the Federal Reserve Bank of Chicago.

(Reporting by Dave Clarke; editing by Phil Berlowitz and Andre Grenon)