Tuesday, November 18, 2008

FDIC chief offers sound mortgage plan

President Elect Obama should include FDIC chief Sheila Bair in his new administration. Here common sense approach to the mortgage problem is clearly better than Paulson and the rest of the Bush Administration.

I support Sheila Bair for Treasury based on her work at FDIC. Especially if Hillary Clinton isn't named Secretary of State, Ms. Bair is a qualified woman with a demonstrated ability.

In the article below, you'll see her approach to the mortgage crisis is clearly better than Secretary Paulson and the rest of the Bush Team. We should reward good work.

Craig Farmer
making the word "liberal" safe again!

Sheila Bair

Reporting from Washington -- Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., is one of the few government officials whose reputation has actually improved during the financial crisis.The soft-spoken academic and author of children's books pushed aggressively for the government to help troubled homeowners -- winning praise from Democrats and a cool response from many of her fellow Republicans.
Now, with President Bush's tenure almost at an end, she's advocating harder for her foreclosure relief plan in what looks like an attempt to impress the man who'll take his place, Barack Obama. In the process, she could secure a role in the new administration.Bair last week took two unusual steps that suggest where she's focusing her gaze. On Wednesday, she publicly criticized a highly touted foreclosure prevention plan from the Treasury Department and other agencies as falling short of what's needed. Then on Friday, Bair released details of her much more ambitious plan -- a $24.4-billion program aimed at preventing 1.5 million foreclosures -- even though Treasury Secretary Henry M. Paulson had told reporters earlier in the week that he would not pay for it.
"Sheila's very ambitious, and I think she's looking for a job promotion in the Obama administration," said Bert Ely, a banking industry consultant. "Even though she's a Republican, she's much more in tune with the Democrats."Bair's Republican registration and her Democratic leanings on handling the mortgage crisis could make her an appealing choice for Obama, analysts said. She has been mentioned as a dark-horse candidate for Treasury secretary, having served as assistant secretary for financial institutions in 2001 and 2002. She has also been thought of as a mortgage czar to oversee the various government efforts to stem foreclosures, should Obama create such a position."I wouldn't mind seeing her as Treasury secretary," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal Washington think tank. He said Obama would be "foolish" not to find a place for Bair in his administration considering her performance during the financial crisis.Bush appointed Bair, 54, to a five-year term as chairwoman of the FDIC in 2006. It is an independent agency, similar to the Federal Reserve, so Bair does not have to step down with the change of administration. Her term on the FDIC board extends even longer, until 2013. But Bair would heed the desire of the new president, said FDIC spokesman Andrew Gray."She has said she believes any incoming president should have the power to choose their own economic team. She would respect any decisions made by the president-elect," Gray said, adding that would include stepping down as FDIC chief or serving in a different capacity."She would be open to his decisions on where he may think she can be best utilized," Gray said.Bair's connection with the GOP is deep. A Kansas native, she served as deputy counsel to former Senate Majority Leader Bob Dole (R-Kan.) from 1981 to 1988. She then was appointed to the Commodity Futures Trading Commission, where she served from 1991 to 1995, including a stint as acting chairwoman. She was senior vice president for government relations for the New York Stock Exchange before joining the Treasury Department. After four years as a professor of financial regulatory policy at the University of Massachusetts, Amherst, she was tapped to head the FDIC in 2006. It was the same year she published her first children's book, aimed at explaining the financial system: "Rock, Brock and the Savings Shock," about two twins and their saving and spending habits. Her second book, "Isabel's Car Wash," about a girl who raises money from her friends to start a business, came out this year. Bair is the mother of two.The FDIC was created during the Great Depression to provide government-backed insurance for bank deposits. But its boss usually works in obscurity, except during severe financial turmoil.Bair has taken the job to a new level. She was one of the first government officials to recognize the problems of subprime loans. At a conference in October 2007, she told investors: "More needs to be done, and done sooner rather than later," to restructure mortgages for troubled homeowners.She took a prominent role in the Bush administration's response this fall, including successfully pressing for a significant expansion of deposit insurance.Bair has also made reducing foreclosures one of her priorities. After the FDIC took over failed IndyMac Bank of Pasadena in July, the agency developed a plan to reach out to struggling homeowners and make their mortgages more affordable. Consumer advocates were heartened.The plan, which has had mixed results, is the basis for Bair's $24.4-billion proposal to have the government cover as much as 50% of the losses on modified mortgages in hopes of persuading lenders to restructure them.Bair's work has drawn praise from many congressional Democrats. Last month, House Financial Services panel Chairman Barney Frank (D-Mass.) and Rep. Maxine Waters (D-Los Angeles) wrote to Bush urging him to have Bair head a government-wide effort to coordinate operations to help homeowners.Bush has not created such a position. And his administration has been cool to Bair's mortgage restructuring plan because it calls for additional spending. Last week, federal officials announced a less ambitious plan to help several hundred thousand holders of mortgages owned or guaranteed by government-run Fannie Mae and Freddie Mac.But Bair publicly criticized the plan. Then on Friday she formally rolled out her own proposal, even though the administration had said it would not fund it. Gray said the move was designed to give lawmakers and others specifics so they could decide whether the plan was worth enacting."I think she and her staff are more focused on where the Democrats are on this than where the Republicans are," Ely said. That could pave the way for a new job for Bair after Jan. 20."I wouldn't be surprised if the Obama administration [creates] a mortgage modification czar," Ely said. "Or in this case, a mortgage modification czarina."Puzzanghera is a writer in The Times Washington Bureau.jim.puzzanghera@latimes.com

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