Sheila Bair - World's Worst Regulator - to Stay at FDIC

So Sheila Bair will hang around as head of the FDIC in the Obama administration. Ugh. I know, I know, Bair is hugely popular in certain circles in Washington, and never fails to get adoring press (most recently, as it happens, in the New Republic). But her let’s-stick-up-for-the-little-guy schtick doesn’t figure to do much to bolster the banking system she’s supposed to be protecting. Nor will it likely speed the healing of the financial system. More broadly, Bair isn’t exactly the profile in courage she’s often made out to be.

So I am not a fan. Why? Let me count the ways:

1. What’s with her obsession with loan modifications? From what I can tell, Sheila Bair’s plan to revive the housing and financial markets begins and ends with easing the loan terms of every delinquent subprime mortgage borrower she can find. Forget about the rights of the bondholders that actually own the loans Bair is seeking to modify. And forget, too, about the signal that borrowers still current on their mortgages will get when they see delinquent borrowers’ loans modified en masse. Bair seems to believe that loan modifications are a good thing in and of themselves, regardless of their broader economic ramifications.

That’s nuts. I’ve said it before and I’ll say it again: a lender should agree to modify a loan only if it expects that the net present value of the modified loan would be higher than it would be if it were not modified. If the lender agrees to modify the loan under any other circumstance, it is simply engaging in a free giveaway to the borrower. That is something one would think a guardian of the soundness of the banking system would disapprove of. Not Bair. She seems to believe that if banks sprinkle their capital on delinquent subprime borrowers, the housing crunch will go away. She’s kidding herself.

Don’t forget, a lot of delinquent borrowers Bair wants to “help” are speculators who don’t even live in the properties (despite what they might have said on their loan applications). They are deeply underwater and just want out. Those people won’t accept a loan mod, no matter what the terms. As for the borrowers who do live in the properties—and I’m going to sound hard-hearted here, but am not—what’s so bad about renting rather than owning? It’s not the unnatural state of affairs that Bair and her prevent-foreclosures-at-all-costs pals seem to think: according to the census bureau, fully 32% of American homes are occupied by people who don’t own them.

2. Bair hasn’t exactly been a picture of independent judgment on other issues either. A judicious regulator? Please. Remember, for instance, what happened in 2006 when Wal-Mart (WMT) wanted to start an industrial loan company? It was an instance of pure cravenness on Bair’s part--and was a good indication of her basic M.O. Naturally, a broad range of Wal-Mart’s traditional foes, from labor unions to community banks, loudly opposed the company’s move. But the guidelines for approving ILC applications are straightforward, and Wal-Mart met all of them. This was clearly a moment when a disinterested regulator (which is what Bair is supposed to be) should ignore the political winds and follow the rules. What did Bair do? She dithered, imposing one moratorium on ILC applications after another, for no reason other than to duck the heat she was feeling. In the end, Wal-Mart withdrew its application after it saw it wasn’t getting anywhere in the face of Bair’s stonewalling. This was not the fearless independent-mindedness that has the press so gushing.

3. Bair’s agency hasn’t done such a great job preventing what’s shaping up to be the next lending train wreck. That would be commercial real estate. The FDIC was basically asleep while the banks it regulates pumped up commercial loan volumes after the housing market cracked. Now—surprise!—delinquencies on those loans are starting to surge, and kick off a second leg to the credit crackup that threatens to prolong the recession. What did FDIC do to restrain the excesses in the CRE market? From what I can tell, nothing. Nobody expects the woman to be clairvoyant, but I don’t know of anything Bair’s agency did to rein in crazy CRE lending.

4. Bair doesn’t seem to play well with others. The financial markets are currently in the midst of their greatest crisis in memory. I for one would appreciate it if the government’s key financial regulators were singing from the same hymnal, and would cut out the sniping, as they tried to fix the problem. But no one seems to snipe more (and try to undercut stated policies more) than Sheila Bair does. I don’t see how that helps anything.

Nobody says the head of the FDIC has the easiest job in the world. But with her pseudo-populism and her eye for the camera, Sheila Bair has perfected the art of getting great headlines, not of making great policy. By the end, the Bush people seemed to regret Bair was on their team. I suspect in not very long, the Obama people will feel the same way. In the meantime, with Bair still at the FDIC, the government will likely be all the more hamstrung as it tries to sort out the mess.

Comments

[Fairness:]

Dare to disagree with most of your points but the first is disgracefully tasteless, and awfully irresponsible too.
The "let’s-stick-up-for-th... schtick" should be most welcome and desired attitude nowadays, which shows exactly a healthy dose of "independent judgment". It's the little guy (fancy your name too) that the whole banking system is living off nowadays, and won't take long until our creative (read crooked) "financial experts" find another novel way (through independent judgment as you wish) to screw us all again in order to get bailed out for the sake of raiding the little guys' pockets again. Have you forgotten Enron, and the likes already? Sure if it is done in mass now, it's no longer visible..., or it's just simply acceptable: everybody does it. Right?
If raiding the little guy's pocket (since we all know the big guy still pays an obscenely small share of taxes) is what you desire, then most likely Sheila Bair is not the right person for the job. Since that little guy is already being robbed by the Bush administration and his rubber-stamp Congress through the bailout, someone has to protect the masses too. We cannot allow the greedy to shamelessly keep massing up the riches on the back of that little guy without impunity. This redistribution of wealth from middle class to the ultra rich is becoming way too disturbing nowadays, while our financial system is a willing accomplice; this trend cannot continue without a mass revolt. Is that what you rather have? Middle class is the backbone of America; we want it thriving, healthy and happy, not exploited, robbed and disenfranchised. So, give the little guy some slack; rather have the riches just once play fair.

Jan 11 08:52 AM

[John Preston:]

Tom

Where do I begin.....

First, as we now know, the housing/mortgage crisis has crippled the economy....spending, both for expansion (construction...busine... investment...etc) and for consumption, has slowed.

Second, jobs are now going way at an accelerated pace.

Third, steps 1 & 2 are a cycle, and they repeat and repeat and repeat.

Robert Shiller, and others, have linked housing to to consumption....since 70% or more of the GDP is consumer driven, fixing housing becomes a priority to stabilizing the broader economy...

Let' see....Case-Shiller HPI is down 30%+....the dow is down 30%+....consumption is down 3.4% +/- (Shiller predicted a 10% change in housing = a 1% change in spending, btw).

Some sharp economist is going to study this period in the near future, from the deliquent homeowners perspective, and find that their household incomce declined by 30%+.

30%+ seems to be the problem...

When unemployment hits 10%....and it will, we may all wish that housing had been fixed, and that the modification process had been done right.

As for Sheila Bair....she got far more right than anyone else in Washington or Wall Street......

Jan 11 10:58 AM

[Zandi:]

Wow, if Sheila Bair (the least guilty in the Bush Administration) should not be kept on for poor regulation, then imagine what the whole Bush administration should be charged with. Rich dudes like this author are classic proponents of the problem with the ultra-conservative ideology; that is "They want the banks and rest of the free-market system to be able to prey on the little guy like parasites. But under this administration, the parasites were allowed to do such a good job feeding on the poor that they killed both the parasites and the host. Why should we feel more compassion for the parasites that have to take some losses because of loan modifications than we do for the little guy that was preyed upon. The banks, bond-holders and hedge-fund managers all knew they were taking chances during the "irrational exuberance" period of the housing boom. The bigger the fool the harder they fall! So are the parasites, er...I mean investors, big boys and girls who played a grown-up game and lost or are they big cry babies like the author?

Jan 11 01:01 PM

[rm:]

[fixing housing becomes a priority to stabilizing the broader economy... ]

How, exactly, do we "fix" housing?

Through "streamlined" modifications?

The "solution" that leads to a 58% default rate within 8 months?

Of course, with streamlining, they'll be doing even less due diligence than they do now.

Yeah, that'll fix things.

Jan 11 01:10 PM

[Tom Armistead:]

Bair's insistence on loan modification makes sense if you just back away from the morality play and look at it objectively: both the buyers and everybody up and down the whole securitization feeding chain firmly believed there was 110 if not 120 cents in the dollar. She just wants to bang their heads togehter and make them redo the deals on the basis there is 100 cents in the dollar.

That is a better solution the destroying the whole system trying to hang onto value that just wasn't there when the deals were made.

Where I have trouble with Bair is that WaMu was adequately capitalized by regulatory standards when seized, so shareholder value was appropriated in the name of feeding WaMu's deposits to some recipient deemed more worthy of the Bush administration's largess.

Jan 11 02:49 PM

[censeo:]

Stained facts and hyperbole. Why not go all the way. I think Mr. Brown has Ann Coulter envy.

Jan 11 11:31 PM

[User 257960:]

I am shocked at the stupidity presented herein. What lead me to this article was a search on Paul Krugman that turn up this Article:

seekingalpha.com/artic...

It is quite obvious that what was presented does not have foresight left alone hindsight.

Jan 12 04:55 AM

[DiscerningWord:]

She comes across as one who could also be an ineffecitve local school board president or someone who fits well into a benign investigational panel. That's what government is looking for. She has not independent thoughts or ideas. But....since the political lifestyle is neat....she'll say whatever keeps politicians and the media happy. I think they also like the name...say it quickly...Sheilabair..... a stage name. So she's got the willingness to comply and a stage name....that's all you need.

Jan 20 01:15 AM

[Yolanda Gib...:]

January 21, 2009


President Barack Obama
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Re: Investigation/Removal of FDIC Chairman Sheila C. Bair, John C. Dugan,Comptroller of the Currency, Julie Williams, Assistant Director Office of Comptroller, John M. Reich, Director, Office of Thrift Supervision

Dear President Barack Obama,

Please do not retain FDIC Chairman Sheila C. Bair. Retention of Chairman Bair will guarantee that your Administration will inherit reported ‘tainted’ fraud at the FDIC reported by myself and former FDIC Whistleblowers (see enclosed) since the early 1970s. I reported FDICs fraud in accordance to the Federal Whistleblower statute ignored by FDIC Chairman.

This serves as an official request that your Administration initiate an immediate investigation of reported fraud at the Federal Deposit Insurance Corporation (FDIC); to and including the immediate removal of Chairman Sheila C. Bair and other reported officials engaged into RICO (Racketeering), inside trading, money laundering, receivership fraud, bank fraud and unregistered Securities Exchange Commission (SEC) Financial fraud linked to FDIC, Indy Bank, Countrywide, AIG, Fannie Mae, Wells Fargo, Wachovia, SunTrust, Lehman Brothers, Wackenhut and other Banking and Financial Institutions.

FDIC Chairman Bair willfully and knowingly ignored reported fraud. Chairman Bair and other Financial regulators must be held accountable for: (1) negligent oversight, (2) safety and soundness of the Banking industry, (3) failure to regulate, (4) failure to audit false financial statements of FDIC CEOs, (5) failure to oversee the Mortgage industry; (6) failure to investigate reported fraud at the FDIC linked to Enron, Merrill Lynch, Countrywide, SunTrust, Wackenhut, Bank Hamilton, Fannie Mae, Freddie Mac, Indy Bank et.al., In retaliation of reporting FDIC Corporate-Wide fraud, Chairman Bair condoned and sanctioned FDICs involuntary removal of my Federal career after 25 years of sustained outstanding Federal services. I now remain without employment, salary, and critical health benefits to care for my severely autistic son with a seizure disorder.

Congressman Barney Frank, Chairman Financial Services is also a partaker of reported fraud at the FDIC. Mr. Frank received evidence regarding FDIC by letter dated May 16, 2008, from former Congressman Albert R. Wynn to investigate the FDIC. (Enclosed).

President Obama, you pledged that you would go line-by-line to ensure accountability. You pledged that you will hold regulators responsible. You pledged that you will ensure accountability, transparency, investigations, and removal of CEOs. I, and millions of Americans elected you as our President based on your campaign promises, pledges, trust, and integrity. I have enclosed evidence of fraud reported against the FDIC (539 page disclosure report). Retention of FDIC Chairman Sheila Bair before reviewing evidence only creates mistrust. The Mortgage crises did not occur by osmosis. The Mortgage crisis was a deliberate attack on American Homeowners by a failed corrupt Government, FDIC corrupt officials, President Bush corrupt Administration; and his cronies appointed throughout the Federal Government.

Furthermore, I demand an immediate removal of FDIC CEO John F. Bovenzi and his spouse Erica Cooper Bovenzi both corrupted officials at the FDIC; to and including the immediate removal of FDIC OIG Jon Rymer. Former FDIC Chairman Donald E. Powell, Frederick S. Selby FDIC Division of Finance Director aka signatory Bank officer to notorious Kenneth Lay (Enron), Wells Fargo, Boatman’s, Wachovia; among other reported fraud must be investigated. President Obama, please do not be naïve. Chairman Barney Frank and FDIC Chairman Sheila C. Bair are both conspirators of fraud reported at the FDIC. The following is evidence that Barney Frank is also an “unregistered” investor of General Motors Corporation. However, Barney Frank voted on the Big3 (Automotive) bailout which is unethical and questionable.
“Barney Frank”
Latest Filing: 7/19/02 as Signatory
As: Signatory (Director, Officer, Attorney, Accountant, Banker, Agent, etc.)
List All Filings as Signatory

Search Recent Filings (as Signatory) for “Barney Frank”
“Barney Frank” has been a Signatory for/with the following 4 Registrants:
• Directv Group Inc [ formerly Hughes Electronics Corp ]
• DISH Network CORP [ formerly Echostar Communications Corp ]
• General Motors Corp
• Hec Holdings Inc
“Barney Frank” has/had a Signatory interest in the following 2 Registrants:
• Directv Group Inc [ formerly Hughes Electronics Corp ]
• General Motors Corp
Copyright © 2008 Fran Finnegan & Company All Rights Reserved.
secinfo.com - Wed, 3 Dec 2008 04:55:49.0 GMT
General Motors Corp • 8-K • For 3/6/08
Filed On 3/6/08 2:58pm ET • SEC File 1-00043 • Accession Number 40730-8-8
As Of Filer Filing As/For/On Docs:Pgs

3/06/08 General Motors Corp 8-K{5,9} 3/06/08 2:6


The Crises on Wall Street was created under President Bush Administration, FDIC regulators, Office of Thrift Supervision, the Securities Exchange Commission (SEC); and other corrupt officials. Evidence is located at lulu.com “Caught in a Web of Bureaucracy” report of Financial fraud by Yolanda C. Gibson-Michaels (539 pages of reported Fraud). Therefore, please consider the implementation of a Whistleblower Disclosure Administration. You must rely upon Federal Whistleblowers if you would like the truth regarding reported fraud, waste, abuse, and corruption. Absent Federal Whistleblowers your quest to uncover the truth will fail as Federal CEOs will continue to hide, obstruct justice and conceal fraud. Federal Whistleblowers play an integral part in disclosing waste, fraud, abuse, and corruption throughout the Federal Government and abroad. Trust, Whistleblowers will not fail you President Obama.

Please reappoint an individual at the FDIC with honesty, integrity, morals, ethics, and values to oversee the Federal Deposit Insurance Corporation (FDIC) and remove FDIC Chairman Sheila C. Bair. Thank you.

Sincerely,
/s/
Yolanda C. Gibson-Michaels (FDIC Whistleblower)
[e-mail]

Cc:Vice President Joe Biden
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Jan 29 04:34 AM

[938hih3hiu:]

I seriously think that Sheila Bair is a part of the problem, and very far from solving the economic problems we are in. She may have been considered to be right on many issue against the Bush administration, not because she was doing it RIGHT, She was doing just opposite of what they were doing and now when it was proved that they did lot wrong, she looked like a hero. Bair has created a panic atmosphere in the country, that is why banks are trying be solvent more than doing their job and sitting on the money. Sheila Bair thank you for bringing so many hard working american people on the street, out of their homes and jobs and now trying to apply band-aid on the economy.

Feb 03 12:52 AM

[Bot:]

Lol ... Obama fires whistleblowers in his own administration and is a massive patronage hirer. He is the biggest fraud of all.


On Jan 29 04:34 AM Yolanda Gibson-Michaels wrote:

> January 21, 2009
>
>
> President Barack Obama
> The White House
> 1600 Pennsylvania Avenue NW
> Washington, DC 20500
>
> Re: Investigation/Removal of FDIC Chairman Sheila C. Bair, John C.
> Dugan,Comptroller of the Currency, Julie Williams, Assistant Director
> Office of Comptroller, John M. Reich, Director, Office of Thrift
> Supervision
>
> Dear President Barack Obama,
>
> Please do not retain FDIC Chairman Sheila C. Bair. Retention of Chairman
> Bair will guarantee that your Administration will inherit reported
> ‘tainted’ fraud at the FDIC reported by myself and former FDIC Whistleblowers
> (see enclosed) since the early 1970s. I reported FDICs fraud in accordance
> to the Federal Whistleblower statute ignored by FDIC Chairman. <br/>
>
> This serves as an official request that your Administration initiate
> an immediate investigation of reported fraud at the Federal Deposit
> Insurance Corporation (seekingalpha.com/symbo...); to and
> including the immediate removal of Chairman Sheila C. Bair and other
> reported officials engaged into RICO (Racketeering), inside trading,
> money laundering, receivership fraud, bank fraud and unregistered
> Securities Exchange Commission (seekingalpha.com/symbo...)
> Financial fraud linked to FDIC, Indy Bank, Countrywide, AIG, Fannie
> Mae, Wells Fargo, Wachovia, SunTrust, Lehman Brothers, Wackenhut
> and other Banking and Financial Institutions.
>
> FDIC Chairman Bair willfully and knowingly ignored reported fraud.
> Chairman Bair and other Financial regulators must be held accountable
> for: (1) negligent oversight, (2) safety and soundness of the Banking
> industry, (3) failure to regulate, (4) failure to audit false financial
> statements of FDIC CEOs, (5) failure to oversee the Mortgage industry;
> (6) failure to investigate reported fraud at the FDIC linked to Enron,
> Merrill Lynch, Countrywide, SunTrust, Wackenhut, Bank Hamilton, Fannie
> Mae, Freddie Mac, Indy Bank et.al., In retaliation of reporting FDIC
> Corporate-Wide fraud, Chairman Bair condoned and sanctioned FDICs
> involuntary removal of my Federal career after 25 years of sustained
> outstanding Federal services. I now remain without employment, salary,
> and critical health benefits to care for my severely autistic son
> with a seizure disorder.
>
> Congressman Barney Frank, Chairman Financial Services is also a partaker
> of reported fraud at the FDIC. Mr. Frank received evidence regarding
> FDIC by letter dated May 16, 2008, from former Congressman Albert
> R. Wynn to investigate the FDIC. (Enclosed).
>
> President Obama, you pledged that you would go line-by-line to ensure
> accountability. You pledged that you will hold regulators responsible.
> You pledged that you will ensure accountability, transparency, investigations,
> and removal of CEOs. I, and millions of Americans elected you as
> our President based on your campaign promises, pledges, trust, and
> integrity. I have enclosed evidence of fraud reported against the
> FDIC (539 page disclosure report). Retention of FDIC Chairman Sheila
> Bair before reviewing evidence only creates mistrust. The Mortgage
> crises did not occur by osmosis. The Mortgage crisis was a deliberate
> attack on American Homeowners by a failed corrupt Government, FDIC
> corrupt officials, President Bush corrupt Administration; and his
> cronies appointed throughout the Federal Government.
>
> Furthermore, I demand an immediate removal of FDIC CEO John F. Bovenzi
> and his spouse Erica Cooper Bovenzi both corrupted officials at the
> FDIC; to and including the immediate removal of FDIC OIG Jon Rymer.
> Former FDIC Chairman Donald E. Powell, Frederick S. Selby FDIC Division
> of Finance Director aka signatory Bank officer to notorious Kenneth
> Lay (Enron), Wells Fargo, Boatman’s, Wachovia; among other reported
> fraud must be investigated. President Obama, please do not be naïve.
> Chairman Barney Frank and FDIC Chairman Sheila C. Bair are both conspirators
> of fraud reported at the FDIC. The following is evidence that Barney
> Frank is also an “unregistered” investor of General Motors Corporation.
> However, Barney Frank voted on the Big3 (Automotive) bailout which
> is unethical and questionable.
> “Barney Frank”
> Latest Filing: 7/19/02 as Signatory
> As: Signatory (Director, Officer, Attorney, Accountant, Banker, Agent,
> etc.)
> List All Filings as Signatory
>
> Search Recent Filings (as Signatory) for “Barney Frank”
> “Barney Frank” has been a Signatory for/with the following 4 Registrants:
>
> • Directv Group Inc [ formerly Hughes Electronics Corp ]
> • DISH Network CORP [ formerly Echostar Communications Corp ] <br/>•
> General Motors Corp
> • Hec Holdings Inc
> “Barney Frank” has/had a Signatory interest in the following 2 Registrants:
>
> • Directv Group Inc [ formerly Hughes Electronics Corp ]
> • General Motors Corp
> Copyright © 2008 Fran Finnegan &amp; Company All Rights Reserved.
>
> secinfo.com - Wed, 3 Dec 2008 04:55:49.0 GMT
> General Motors Corp • 8-K • For 3/6/08
> Filed On 3/6/08 2:58pm ET • SEC File 1-00043 • Accession Number 40730-8-8
>
> As Of Filer Filing As/For/On Docs:Pgs
>
> 3/06/08 General Motors Corp 8-K{5,9} 3/06/08 2:6
>
>
> The Crises on Wall Street was created under President Bush Administration,
> FDIC regulators, Office of Thrift Supervision, the Securities Exchange
> Commission (seekingalpha.com/symbo...); and other corrupt
> officials. Evidence is located at lulu.com “Caught in a Web
> of Bureaucracy” report of Financial fraud by Yolanda C. Gibson-Michaels
> (539 pages of reported Fraud). Therefore, please consider the implementation
> of a Whistleblower Disclosure Administration. You must rely upon
> Federal Whistleblowers if you would like the truth regarding reported
> fraud, waste, abuse, and corruption. Absent Federal Whistleblowers
> your quest to uncover the truth will fail as Federal CEOs will continue
> to hide, obstruct justice and conceal fraud. Federal Whistleblowers
> play an integral part in disclosing waste, fraud, abuse, and corruption
> throughout the Federal Government and abroad. Trust, Whistleblowers
> will not fail you President Obama.
>
> Please reappoint an individual at the FDIC with honesty, integrity,
> morals, ethics, and values to oversee the Federal Deposit Insurance
> Corporation (seekingalpha.com/symbo...) and remove FDIC
> Chairman Sheila C. Bair. Thank you.
>
> Sincerely,
> /s/
> Yolanda C. Gibson-Michaels (FDIC Whistleblower)
> [e-mail]
>
> Cc:Vice President Joe Biden
> The White House
> 1600 Pennsylvania Avenue NW
> Washington, DC 20500
>
>

Jun 16 10:12 PM