Banking Law

Sheila Bair won't quit. Like the Everyready Bunny, she just keeps going, and going, and going, on and on, singing the same old tired, sad, off-key tune. The fact that her intended audience continues to passively-aggressively ignore her when she talks to them and, when her back's turned, to give her a derisive middle finger, not only doesn't discourage her, it apparently energizes her. Obviously, she's deep into the D/S scene, and not on the "dominant" side of role playing.

In today's The Wall Street Journal, reporter Michael Crittenden faithfully reports yet another public yap-fest by Sheila in which she berates "[p]olicymakers, banks and other players in the housing market" for continuing to review loan portfolios "loan-by-loan" instead of just grabbing huge fistfuls of subprime loans and implementing "a more systematic approach to moving homeowners into more affordable loans." In other words, damn the facts and rational analysis, damn concepts of equity, damn what people in the mortgage business might consider to be in their own best financial interest, full speed ahead!

A normal, rational person who heads a powerful government regulatory agency might actually start to rethink a position if those who are supposedly subject to her influence pay her lip service, then continue doing things the old fashioned way.  Obviously, the "players in the housing market" have decided something: Sheila's not a player, or, if she is one, she can go play with herself.

Since we're talking about a career pol and academic, however, here's an idea for Sheila to chew on. Since she obviously knows better than other market participants what's in their own best interests, her position on wholesale loan modifications MUST BE the path to safety and soundness for the financial institutions the FDIC insures. As to those market participants who are subject to the FDIC's regulatory control, which, frankly, since she's so obviously right, would include all FDIC-insured institutions, even those whose primary federal regulator might not be pushing the same agenda as Sheila, she should be forcing them to adopt wholesale loan modification programs. Since the OCC, the OTS and the Federal Reserve don't know slime-from-shinola about this issue, and state bank and thrift regulators are equally ignorant and/or ineffectual, the FDIC should use its primary and backup enforcement authority to force the issue, to make these cretins fall in line. Any rational person would have to agree that a loan-by-loan analysis is not acceptable, right, so force those participants that you can reach to do what you want them to do.

In other words, Sheila, put up or shut up. The jawboning isn't working and is making you look not only foolish, but weak, which in D.C., is the bureaucratic kiss of death.

It might be that Ms. Bair realizes that she's on the sidelines and is not attempting to do anything other than conducting a PR campaign to build up her gravitas for her next job as the head of ACORN, a professor of finance at Bryn Mawr, or the Consumer Credit Commissioner of a state of her choice. Colorado's in the process of turning from red to purple, which ought to make it an attractive (or at least tolerable) destination for someone like Sheila (plus, she'd be only an hour away from radical snowboarding venues). So no one misunderstands where Ms. Bair's coming from in this "hurry-up-and-modify" world she lives in, she "demolished" the entire idea that there are any borrowers who might not be entitled to a loan modification.

She stressed the need for consumers to contact counseling groups and their lenders to try and prevent foreclosures. But describing a recent foreclosure prevention event she attended in California, Bair said policymakers need to better address the plight of consumers.

"I think we miss the human side of how this is impacting borrowers," Bair said, criticizing efforts by some policymakers to cast troubled borrowers as investors or speculators.

  "I didn't see a lot of house flippers," Bair said of the California event.

Ms. Bair attended an event in California and did not see "a lot of house flippers" there. Which is evidence of nothing, except that Ms. Bair views the world through a glass darkly.

Is it 2009 yet? Is there a new administration in the White House yet?