BoomerGirl Diary

Thirty-two years after she stamped passbooks at her hometown savings and loan, Sheila Bair fears that America has lost its penchant for putting away money for education, for unexpected expenses — for anything, really.

And now, as the economy struggles to deal with the aftermath of thousands upon thousands of mortgage loans granted to people with risky credit, Bair is hoping that Americans finally will come to realize the importance of keeping money on the plus side of the ledger.

Whether it’s paying off credit card debts on time, avoiding payday loans or understanding the implications of taking out an adjustable-rate mortgage, Bair is busy spreading the word about the value of financial literacy and discipline.

“People have forgotten what it’s like to sock money away,” said Bair, now chairwoman of the Federal Deposit Insurance Corp., the agency charged with maintaining confidence in the nation’s banking system. “We need to get back in touch with that.”

In a visit last week to her alma mater, the University of Kansas, Bair applauded the School of Business for launching a financial literacy class for undergraduates, who now can learn how to keep a balanced checkbook, save for retirement or avoid credit debt. It’s all part of helping consumers survive and thrive in a complicated financial world, one in which credit terms can trip up even conscientious borrowers and saving money becomes less and less fashionable.

“I feel strongly that we need to do more to reinstill a savings culture in our culture,” Bair said. “I think we do overuse debt, and I think we need to get back to basics: saving for a rainy day, building wealth and perhaps making some sacrifices on immediate consumption to save a little more for longer term economic health.

“I think those are values that our Depression-era parents had, but we’re losing somewhat now.”

Bair does more than educate. As chairwoman of the FDIC, she leads an organization that has responsibility for insuring $4.2 trillion in deposits in 8,615 financial institutions. The FDIC’s insurance fund has a balance of $51.2 billion, and it is Bair’s responsibility to safeguard the money so that it can protect depositors.

During her visit to KU, Bair said that she would expect the fallout from subprime loans to continue through 2008, as another 1.5 million adjustable rate mortgages have yet to reset from the low rates granted during rosier times to the higher interest rates feared today.

“We have strongly encouraged banks ... to try to find refinancing opportunities for people who are trapped in these loans,” Bair said. “It is in their best interests to avoid foreclosure — even if it means reducing the interest rate. Because being paid on the mortgage, or projected to be paid on the mortgage, they’re still going to come out ahead with having a performing loan versus having a loan that’s in foreclosure. A foreclosure costs a lot of money and it will have a depressing impact on a lot of neighborhoods.”