WASHINGTON (CNN) - WASHINGTON (CNN) - FDIC Chairwoman Sheila Bair has a chilly reaction to European calls for stepped up international regulations of the financial markets. "So frequently the international standards become so watered down," she says. As leaders met for the G20 summit, Bair sat down for an interview with CNN and cautioned that adding any new regulations without considering how they'd be enforced "is something we need to think carefully about."
Priot to the summit, German Chancellor Angela Merkel and French President Nicolas Sarkozy called for greater scrutiny of the financial sector. Sarkozy demanded "real transformation" in regulatory structures. And Merkel announced she had a set of "red lines" that must be met.
The G20 leaders agreed to establish a new financial stability board as an early warning sign for future crises, but it appears the board will have little power to actually crack down on risky investments like hedge funds.
Bair believes that new global standards would, of necessity, be set by committee and would be less stringent than the rules already on the books in the US. "I think we clearly need better regulation, regulation more focused on where the risks are," says Bair. She believes the financial crisis emerged, in part, from a failure to enforce the existing regulations. "We need to understand we had a lot of regulation already. We weren't using the tools we already had," she said. She insists that for the most part what's needed is "smarter better-focused" oversight.
Bair sees another hurdle to setting a global standard for financial regulation: there's a cultural difference between Europe and America when it comes to "the relationship between government and banks." Unlike the United States, she says, many in Europe are comfortable with a banking system made up of "a handful of very large institutions that have implied government support." But she believes that in this country "we've gone too much in that direction already" - the administration wants "to sever that tie and get the banks to be completely privately supported by private investment, and not be too big to fail that the government would have to step in again."
Despite the cultural differences, Chairman Bair shares at least one thing in common with one of her European colleagues. Last year, Bair was ranked number two on Forbes' list of the most powerful woman in the world. The number one spot went to "red line" advocate and German Chancellor Angela Merkel.