Why sexism is behind the attacks on the FDIC chief.

I recently heard that Vogue was desperate to find women prominent in the colossal effort to fix the financial crisis to profile. Um, hello! FDIC Chairwoman Sheila Bair is arguably the most powerful woman in the world right now, a fact for which we should all be grateful. Universally regarded as the sole member of the Bush administration's crisis rescue team to have recognized early both the magnitude of the fraudulence in the mortgage business and the magnitude of the risk that fraud posed to the financial system, Bair has distinguished herself as not only our most populist regulator but, if a recent New Yorker profile is to be believed, our most intellectually curious and competent regulator as well.

But Bair apparently didn't fly with Vogue's photo department, and for reasons that seem equally inane and insulting, she's been kept out of the administration's financial-policy decisions as well.

The Treasury Department's recent white paper on financial reform seemed almost specifically designed to minimize Bair's role in future management of the crisis. (The New York Post called the FDIC the "biggest loser" under the proposed overhaul. Back in December, Treasury Secretary Timothy Geithner reportedly—though he denies it now—tried to have her ousted. Sources of mine also say he repeatedly leaves her out of decisions that affect her agency, ignores her ideas in meetings, and dispatches deputies and allies to smear her as a power-hungry "activist regulator"—The New Yorker even characterizes her as such, which is somewhat extraordinary in light of the considerable "activism" that has been pursued in this crisis—in the press.

All the negativity has taken a toll on her reputation. The New Republic went from a glowing examination of her record a few months ago to a more recent musing on why the administration hadn't just canned her already.

Why indeed? Following a thorough review of her record and consultations with at least two dozen individuals with infinitely more financial expertise than myself, I am going to have to go with: because the criticisms of Sheila Bair's leadership amount to and have only spread thanks to the pervasiveness of basic sexism.

I am not saying sexism is the reason Geithner doesn't like Bair. And it doesn't seem to have much to do with the contention of Australian money manager John Hempton, her most relentless blog hater, that Bair ought to be indicted. But the stealthy smearing of the Geithner camp and the public rants of angry bloggers would not combine and compound as they have if they could not tap into the financial fraternity's deep reserves of repressed boy's clubism and not-so-repressed misogyny.

The problem runs much deeper than the obligatory puerilities of readers on finance blogs advising Bair to "suck [Citigroup CEO Vikram Pandit's] dong" or any other of the "physically impossible, even for a contortionist" sort of acts to which they fantasize about submitting her in their private e-mails. I am not really even talking about whatever other chromosomal invectives Pandit reportedly hurled at Bair on a 2 a.m. conference call when she backed out of a tentative deal to sell the hemorrhaging Wachovia to Citigroup (C) when Wells Fargo (WFC) emerged with a better offer.

The problem is more that when Bair confronts the financial world with substantive policy criticisms, she is repeatedly dismissed with euphemistic epithets, such as not being a "team player." The truth is that Bair never forgot what team she was playing for. A Republican Bush appointee who served as counsel to Bob Dole during his term as Senate majority leader in the '80s, she more recently became the favorite regulator of Barney Frank, a lifelong critic of both Republicans and the Senate. While Larry Summers was in Japan (along with his protégé Geithner) lobbying central bankers to ease their regulations on derivatives back in 1993, Bair was voting against the easing of regulations on the derivatives business being lobbied for by one of its particularly profitable players, Enron.

Bair was a lone voice of anti-deregulatory dissent on the Commodity Futures Trading Commission at the time. The ruling, which found a strident champion in then-CFTC Chairwoman (and wife of deregulation zealot Sen. Phil) Wendy Gramm, passed five weeks before Gramm was named to the Enron board of directors. The "Enron exemption," as it would be nicknamed, is blamed by many for the company's abusive manipulation of energy shortages in California and other markets; some would go so far as to blame it for the company's demise.

It was also a precursor to the Commodity Futures Modernization Act, which in 2000 outlawed the regulation of derivatives, enabling a $600 trillion market to operate wholly without government oversight. Bair's immediate concern was fraud: As markets became more efficient, derivatives traders would be pressured to exploit and create inefficiencies at the (sometimes colossal) expense of their customers. The CFTC had outlawed "boiler room" futures operations after a series of farmer suicides in the 1920s; Bair didn't see how Enron promised to be any different. "The only arguable distinguishing feature between exempt transactions under the order and the typical gasoline boiler room operation is the requirement that participants be commercial entities," Bair said. "We have brought a number of enforcement actions where the victims have been so-called institutional or sophisticated investors."

But the contention that such sophisticated investors could be trusted to police the derivatives markets themselves was entering the realm of bipartisan conventional wisdom. Three years later Wendy Gramm was replaced by Brooksley Born, who was inducted into the Clinton administration regulatory clique with a lunch invitation from Alan Greenspan. At lunch, Greenspan echoed Enron's rationale: "He explained there wasn't a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him," Born recalled in a recent Washington Post story. Born disagreed and famously pushed hard for tougher regulation of derivatives both to combat fraud and to monitor her heightening anxiety about systemic risk, only to find herself repeatedly struck down by the Greenspan-Rubin-Summers triumvirate in what was quickly and tellingly labeled a "personal" conflict. "They felt, I think," former House financial services committee Chairman Jim Leach recalled of the trio, "that they understood finance better than she did."

They didn't. But there is considerable evidence all three still think they do, and with the exception of Greenspan the same team of know-it-alls has reunited around Geithner to fix the disaster even Bill Clinton concedes (the former president recently called refusing to regulate derivatives his single biggest economic policy mistake) they enabled.

But today Sheila Bair is the woman the clique accuses of engaging in a "personality" conflict with them, and the media should know better by now than to believe it. Because by now we not only know they were wrong, but that Larry Summers doesn't hold much respect for women in matters involving math, an admission he made while personally directing Harvard's endowment managers to invest in a complex interest-rate derivative that ended up losing $500 million or so of the endowment's money this year. We also know that Bob Rubin was Citigroup's most powerful champion of an aggressive push into  evermore dubious collateralized debt obligations that rendered that bank a $45 billion ward of the state. We also know that while Bob Rubin and Sandy Weill were busy trying to cajole Geithner to leave the New York Fed for the office they eventually gave to Vikram Pandit in the fall of 2007, Bair was already coming under fire from the bank's lobbyists for her public call for banks to freeze rates on adjustable-rate subprime mortgages.

And those are just Bair's enemies in the Democratic Party. Of her critics in her own party, we know that former Treasury Secretary Hank Paulson, by his own admission, did not actually believe in regulation before he moved to Washington in 2006 in exchange for more than $100 million in tax cuts. Prior to 2008, Paulson's record on the subject of systemic risk is best illustrated by the time he cynically exploited it to oust his biggest rival at Goldman Sachs (GS), CEO Jon Corzine, in the aftermath of the Long Term Capital Management implosion. Corzine had pledged $300 million in the firm's funds to recapitalize a hedge fund in a bailout that saved the derivatives markets from a bank run and eventually turned a profit for Goldman and the 13 other investment banks that pitched in. But Paulson was concerned with neither the long term nor the larger system nor any logical argument that might get in the way of his own consolidation of power.

Then there's the Republican currently running Citigroup, Vikram Pandit, whose hedge fund was languishing when the bank called him in to examine its books in the wake of its devastating decision to essentially outsource its risk management department to the bond trading division. We know that Pandit was one of the major catalysts for a bond trader named Allison Schiefflin to file the first of three landmark sex discrimination cases that Morgan Stanley (MS) eventually shelled out more than $100 million to settle. (After years of working 80-hour weeks without a promotion, Schiefflin had complained to Pandit of gender discrimination; his response, according the complaint, was to invite six of his female subordinates to dinner to explain that institutional sexism was a "cultural thing" and that they should "look forward" and remember their role setting an example for the next generation because there was "no pot of gold at the end of the rainbow at Morgan Stanley.")

Finally, there is the Republican comptroller of the currency, John Dugan, the latest member of Team Tim to publicly undermine Bair. Dugan, who spent the decade before assuming his current post as a bank lobbyist, is a shamelessly mendacious ideologue of the sort that can only be manufactured over a career spent in Washington.

Invariably Bair's clashes with Dugan, Geithner, Summers, and the rest are characterized as "personal." "With Dugan it is never about policy or substance," says one trade journalist. "It is all personal." But in the absence of any genuinely personal reasons to hate her, it's hard not to conclude that "personal" is code for "sexist."

Among Bair's haters, the lone semicoherent critique of her record comes from Hempton, who took issue with her pre-emptive decision to seize Washington Mutual and sell its assets at a fire sale price to JPMorgan (JPM) back in September, wiping out its senior unsecured creditors in the process. Hempton claims the seizure of WaMu, which was still technically solvent at the time, "gifted" an egregious handout to JPMorgan at the expense of private, often Chinese-government-controlled investors whose vital funding of the financial sector evaporated in its aftermath. Hempton, who by his own admission lost money (albeit only 2 percent of his net worth, he says) in the seizure, would be more credible if either WaMu or the government agency charged with assuring its alleged solvency had been any less rife with fraud, but both the bank and its regulator, the Office of Thrift Supervision, were borderline criminal enterprises—and Bair seized the former only after a 10-day bank run that erased 10 percent of its deposits.

Hempton and his fellow enraged WaMu investors, one of whom likens Bair to a Nazi, might also be more credible if they had any sort of viable theory about her motives. In April, Hempton speculated that she was "on the take" from the big banks, including Citigroup, on the basis of her supposed attempt to "gift" Wachovia to Citi in the same way she gave WaMu to JPMorgan and her apparent agreement to go along with Geithner's flawed Public Private Investment Partnership plan to spur trading of so-called "toxic" assets by offering nonrecourse government loans. "Clusterstock argues that Sheila Bair is seemingly oblivious to the corruption possibilities," Hempton wrote. "She isn't seemingly oblivious.  She is totally captured by JPM and Citi."

Both theories were laughably wrong, of course. According to my sources, Geithner barely consulted Bair on the terms of the PPIP, so she had to kill it softly over the ensuing weeks. And as for the notion that Bair is "captured" by Citi, well, anyone at Citi might take issue with that characterization, although one trader and financial blogger told me the current rumor on the Street is that Bair is "gunning" for Pandit's job.

Sheila Bair has one critical ally in Obama's financial team, SEC Chairwoman Mary Schapiro, who chaired the CFTC for a year of Bair's term as a commissioner. Since inheriting her disemboweled, disillusioned, and de-funded embarrassment of an agency in January, Schapiro has heartened early skeptics like me by moving aggressively to regulate derivatives and restore the SEC's old reputation as an efficient (and fearsome) policer of Wall Street shenanigans. Schapiro has gone on the record favoring her proposal to convene a multiagency systemic risk council over Geithner's plan to concentrate the bulk of new powers in the Fed.

Which brings me to the one member of Team Tim who doesn't seem to harbor animosity toward Bair: Fed Chairman Ben Bernanke. While they have disagreed at times—over, for example, allowing Bank of America (BAC) CEO Ken Lewis to use unexpected fourth-quarter losses at Merrill Lynch to wrangle more federal support for his takeover of the firm—most of their conflicts have been structural rather than ideological or personal. (Bair has publicly called Bernanke's management of the crisis "heroic.") And while the Fed stands to gain considerable power under Geithner's proposed overhaul, it's unclear who has been jockeying harder for that, Bernanke or the Obama official widely believed to be jockeying for his job when his term ends next year: Larry Summers.

Many observers doubt the Obama economic team's plans will get far beyond white paper status without input from Bair or Schapiro. "There are very few people in Washington who can actually see problems before they emerge, with the foresight to think through the consequences of policy decisions the way she can," says Marc Sumerlin, who recalls working harmoniously with Bair on corporate governance reform during the early days of the Bush administration, despite serious tensions between their bosses, National Economic Council Chairman Larry Lindsay and Paul O'Neill. "The girls run Washington right now," adds Chris Whalen, a bank risk management consultant and former New York Fed official who has known Bair since her days as a Dole staffer, when she worked as a "cloakroom girl" briefing senators on important votes.

Even then, Whalen said, it was "no secret she wasn't an ideologue." That may have kept her from advancing in Republican electoral politics; when she ran for a seat in a hotly contested Republican district of Kansas in 1990, Dole refused to endorse her for the primary. When she ended up losing by a few hundred votes, she related recently during a little-noticed speech before the Financial Women's Association, Dole told her it was probably because she was a woman. Now Barney Frank says the same thing, that she rankles the "regulators up in the tree house with a 'no girls allowed' sign." The difference, Whalen says, is that "Schapiro and Bair are the real insiders now."

That won't prevent bloggers like the self-proclaimed misanthrope behind the Bank Lawyer's Blog from posting unsubstantiated rants about her ineptitude, lust for power, and perverse "fetish for consumer advocacy."  But maybe it will prevent the nation's lawmakers from once again succumbing to the disastrous logic that the tree-house dwellers can police themselves.