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Fun-sized financial lessons: Former FDIC chair turns money matters into children's books

Sheila Bair, former FDIC chair, talks about translating Ponzi schemes, buy-now-pay-later warnings, and more into illustrated books for kids.

Video Transcript

ADAM SHAPIRO: We have roughly 45 minutes to the closing bell. When you have Sheila Bair as a guest on the program, you want to jump right in because there's a lot to talk about. Of course, a lot of people know your financial expertise. And just want to remind people, you are the former chair of the FDIC.

I do want to talk to you about a lot of headlines, but before we get there, what some people may not realize is that you author a series of children's books, which are designed to help parents teach their kids about really important financial issues that for a lot of people, it's difficult to talk about with their kids. And your latest book, I believe, is "Princess Persephone's Dragon Ride Stand." What is this about? What are the lessons that all of us, adults or children, can learn from it?

SHEILA BLAIR: Well, actually, "Princess Persephone's Dragon Ride Stand" is coming out next year. And it's a great book. It's about entrepreneurship. And Princess Persephone lives on the Ice Moon of Ganymede. And she sees a TV ad with Earth. And she really wants to go to the beaches of Earth. Her dad tells her no. And she defies him and starts a dragon ride stand business with her dragon to raise money to buy a pink spaceship. So they work really hard. There's a lot about marketing and pricing and knowing your customer.

They get the money, they buy the pink ship. They go to Earth. She gets a sunburn. She's miserable, she goes right back. So it's really about how hard it is to earn money and how quickly it can escape you, how quickly you can spend it and squander it. And it's one of my favorites. It's got a lot going on. The two that are already out now, one's called "Billy the Borrowing Blue-Footed Booby." That's actually about-- that's a riff on a Buy Now Pay Later scam. It's about a little

[INTERPOSING VOICES]

He gets head over heels in that. And then Princess Persephone is also out this year. It's called "Princess Persephone Loses the Castle." And that's about a home repair mortgage scam. So they all have happy endings. I'm finding the financial services sector, some of the bad parts of it can create some kind of interesting stories and good villains. But the hero and heroine always come out well at the end. And hopefully kids and their parents have fun reading it and learn something at the same time.

ADAM SHAPIRO: Yeah, that "Princess Persephone Loses the Castle" will hit home, perhaps too close to home, for a lot of Americans to survive the financial collapse. Let me-- I want to go back to the books in a minute. But you're writing these books. And we're having a good smile. And these are important issues. And yet, there are so many things that are going on, for instance, right now, in the financial world, that people-- it's very hard to have a grasp if you don't have a PhD in finance or economics.

And I mean, we could talk about crypto, and for instance, we're hearing these debates about regulation. Most of us don't have time to get up to speed on that. So should-- is it the role of the government and should the government-- for instance, there's this proposal to regulate stablecoins with only the large banks being able to issue and manage. Is this the right course of action?

SHEILA BLAIR: No, no, I don't think it is. Look, I think stablecoins need regulation. There's no doubt about that. There's some stablecoin issuers out there that they are scams. And I worry about people losing their money. So they need regulation, but shoving it all into big banks, I don't think, is the right way. I have suggested that they really are more like a government money market fund, that if the stablecoin issuer wants to say, I'm giving you a stablecoin that's tied to $1. And the Fiat dollar that they collect for issuing that stablecoin should be invested in short-term, highly liquid federal government securities.

I'm on the board of a company that has a stablecoin that does that. And I think that's really the best model. But we do need some regulation. But I don't think just forcing the banks is really going to-- I think banks make mistakes, too. That's a multibillion dollar market. Putting all that money into banks where they can go do all sorts of things with their money, their reserves that would be held against that, those stablecoins, you know, there's a question there, too. So I think actually the government money market fund model is a much better model for this business. And it's safer for investors.

ADAM SHAPIRO: The other thing, though, that I don't know if your books actually touch about this because children probably need to learn these days once again about inflation, but you have a recent article which is on your Yahoo Finance author page about Lael Brainard. And you actually point out a lot of progressives seem to be thinking she is a very good person and should have a greater role at the Fed. And yet, they might be missing the fact that it's about price stability and that she's very much in line with that. What would they need to hear about that?

SHEILA BLAIR: Yeah, well, it's an important point. I mean, I think there's much daylight between her and Jay Powell on monetary policy. Actually, she was pretty hawkish during the Trump era when the labor markets were tightening. And she-- international portfolio Treasury, she saw what inflation does to developing countries. So I don't think-- if anything, I would think she might be a little stronger on inflation.

But she understands the financial stability piece of this. And that's the real challenge if the Fed finds it necessary to tighten and raise rates. We're seeing now the corrections that are going into the market. Valuations are so high because this is protracted period of accommodative monetary policy, a lot of leverage in the system. As rates go up, as monetary conditions tighten, this valuation is going to drop. Highly leveraged borrowers are going to get into trouble.

We need somebody with a lot of expertise on the financial stability side of the Fed's mandate to understand these dynamics and manage it. And I think she really is very, very strong. You have a demonstrated record in this area. It's been in her portfolio at the Fed. She worked on the cleanup of the financial crisis when she was at Treasury. So I have a lot of respect for her. And I wish them both well. I think they're a fine team. But I hope Mr. Powell will rely on her a lot on financial stability issues because she's very strong there.

ADAM SHAPIRO: I want to get back to the books, but using an actual headline right now-- and I want to give Princess Persephone a break because I think she's getting dragged through a lot of issues. But one issue, whether it's 401(k) fees or even bank fees, we just saw that one of the banks is getting rid of bank fees. What do you think of the news that they're doing that? It's Capital One is getting rid of overdraft fees. And would that be a topic that we need to teach kids about? Because you can get hit hard by fees you don't understand.

SHEILA BLAIR: Yeah, you absolutely can. I was actually-- maybe a future book. I think, you know, this is-- it's so important. The kind of book I do not write is like, here's how to get rich quick. You know, here's how to make a million dollars. Here's how to play the stock market. I really don't like books like that, especially for young people.

Most people can build financial wealth just by not losing money. Don't pay overdraft fees. Don't have accounts that have it. Don't overdraft your account. Don't carry credit card balances. Don't-- you know, don't borrow for frivolous things. Wait until you can actually pay for it, or then just don't buy it. So much money is lost with overdraft fees, interest, late fees, people borrowing beyond their means, just by changing those behaviors.

And, frankly, the providers make money off of that. They make money off of people's not being-- well managing these various financial products. So I hope that fee-based overdraft protection's time has come to go. It's been a bad product, tens of billions of dollars every year paid. It hits lower income families, especially families of color. And [INAUDIBLE] Cap One, Ally, a number of banks are completely getting rid of it now. It's an important trend. And I hope the others will follow suit.

ADAM SHAPIRO: Sheila Blair, it's always good to see you. And just want to remind everybody, if you're looking for these books, it's "Billy the Borrowing Blue-Footed Booby" and "Princess Persephone Loses the Castle." It's about a home repair mortgage scam. I promise you, a lot better than the books we grew up with, like "Go, Dog, Go" and "Argue My Mother," although they are classics. Sheila Bair, all the best to you.

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