Banking Law

Last night, a reader alerted me to Damian Paletta's breaking news in The Wall Street Journal that the FDIC's Sheila Bair had assisted the Treasury Department by proposing a dandy little scheme to spend $50 billion in taxpayer funds to bail out one million subprime borrowers with low-interest loans. Obviously, the plan has a lot more to it than that, but why waste any more breath on it than Treasury Secretary Paulson did today.

Paulson said he will "look carefully" at the FDIC plan, while emphasizing his confidence in the Hope Now Alliance of lenders spearheading a private effort to modify home loans.      

"It's only fair to point out our priority is doing the things we're already doing administratively, doing the things we're already doing working with the private sector," he said. "That's where we are, that hasn't changed, despite my high regard for Sheila."

A blatant brushoff if I've ever read one, complete with a not-so-coded "despite my high regard for Sheila." That reminds me of a parenthetical in a recent post by Yves Smith at Naked Capitalism in which he asserted that female regulators might be better suited to cracking down on the good-old-boy business of banking: "(the horrific example of Sheila Bair notwithstanding)."

A financial advisor for a private equity fund e-mailed me today with this question regarding Bair's proposal: "What the **** has this got to do with the business of the FDIC?"

Not a damn thing. It's got everything to do with Sheila Bair's personal agenda, however. In a lame duck administration, there's apparently no one making her do the job she was hired to do.

The preliminary puzzled reactions are nicely summarized by Paul Jackson at Housing Wire, if you're interested. A more "spirited critique" is contained in this post at Market Ticker (the answer to his question is "yes.") I'm consigning this to the same dust bin where I filed the OTS' proposal on negative capital certificates (although I have much more respect for the OTS and John Reich). Wake me up when someone with power starts taking an interest and pushing it forward.

Shooting down Sheila is like bringing down the Goodyear Blimp "Snoopy 2" with a surface-to-air missile. There's not much sport left in it.