Why Sheila Bair Will Lose to Geithner

The pitched battle over regulatory reform essentially boils down to two perspectives. There is the Geithner camp that argues systemic risk should be monitored and minimized when it pops up. And there is the Sheila Bair camp that says the prospect of concentrated systemic risk should be eliminated before it has a chance to surface, much in the way Teddy Roosevelt eliminated the opportunity for trusts to surface.

Whichever side you agree with (I favor Bair's) matters little, because the ultimate winner will be crowned not on merit, but on another factor: access to President Obama.

This week The New Yorker published an interested, if flawed profile of Sheila Bair, the chairwoman of the FDIC. Beyond the article's main, glaring shortcoming (it doesn't acknowledge that Bair had a part in failing to prevent the subprime mortgage meltdown), it raises an interesting detail about Bair's access to Obama:

As the head of an independent agency far from the West Wing’s inner circle, Bair has limited access to the President. She has met with him privately just once this year, on Air Force One, returning from an event in Arizona where he announced his mortgage-relief plan, modelled on the loan-modification ideas that Bair had long advocated.

Bair has, in fact, attended other meetings with the president and his other advisors, but still it is clear that Bair has little access to Obama. John Dugan, the Comptroller of the Currency, has also met with Obama only a few times.

Not Timothy Geithner. He meets with the president, face to face, almost daily. I get the Treasury Department's daily schedule for Geithner. Almost everyday the following appears at the top of the list:

On [INSERT DAY HERE] morning, Secretary Geithner will attend the President’s Daily Economic Briefing at the White House. This meeting is closed press.

Bair is well outside the loop -- and no policy argument can overcome that, which is why Obama's proposed regulatory reform schema looks like it was written by Geithner, with only margin comments from Bair. Why else would the Federal Reserve, the propagator of systemic risk, be assigned the job of monitoring systemic risk?

You know what they say about real estate? Location, location, location. The same holds true in Washington, DC politics.

Disclosure: no positions

Comments

[change is t...:]

Wanna bet? Shelia Bair will be the only official to come out of this clean as a whistle. She wrote an op-ed piece in the NYT that was a real modification plan back in 2007. Hers is a very interesting story, and her opinion carries more weight because she is not connected but she is sophisticated enough to plant herself on all the right media outlets.....which always like drama. Either way this plan goes....Senator Bair may very well be what you see next.

Jul 02 12:03 PM

[Dirtnap:]

Not to be overly pessimistic, but I'm pretty sure access to Obama has little to do with it. In our current political-economic climate, the president may have large amounts of control over non-economic issues, such as domestic policies and social reform. Obama has little say in our macroeconomic policy, because that power has essentially been relegated to the finance industry. Because Geithner is an insider willing to help enrich the finance industry, he will be sucessful.

Jul 02 01:46 PM

[lickbush:]

One slight modification re: Geithner - more accurate to refer to him as Summers' puppet (or marionette if you prefer).

Jul 02 02:49 PM

[gregoryguay:]

I own a condo and have an outstanding balance of $140k, consisting of $104k primary and $36k secondary. I took the home equity to consolidate debts. At the time the property was valued at $163k but now it is valued at $134k. I'm looking to sell because i am engaged and will be moving into my fiancee's home. Check obamamortgage2009.blog... If I have a buyer who offers me within say $5-7k of the outstanding, can i agree to assume a loan on the residual and pay the bank the difference over time with interest? The same bank holds both mortgages.

Jul 02 10:52 PM

[howardamin:]

It is estimated that Obama's plan could benefit 8 to 9 million homeowners from the new modification procedures. So how do you know you qualify for the Mortgage Modification? Check the website obamamortgage2009.blog.../
to see if you qualify. I was also in trouble and I am glad I did check it before I talk to my mortgage company and it helped - howardamin, California

Jul 03 02:34 AM

[howardamin:]

It is estimated that Obama's plan could benefit 8 to 9 million homeowners from the new modification procedures. So how do you know you qualify for the Mortgage Modification? Check the website obamamortgage2009.blog.../
to see if you qualify. I was also in trouble and I am glad I did check it before I talk to my mortgage company and it helped - howardamin, California

Jul 03 02:35 AM