Chairman Bair in Danger of Losing Post

by Simon Lindsay on General

The Chairman of the Federal Deposit Insurance Corporation, Sheila Bair, has campaigned for a program to rework mortgages in order to stop foreclosures. These efforts in dealing with the critical issues on foreclosures had won her respect from several legislators and several other sectors. She has also gained support from Senate Banking Committee Chairman Christopher Dodd and House Financial Services Committee Chairman Barney Frank who are pushing for the implementation of her proposed mortgage-restructuring program to stop foreclosures.

However, her efforts have also gained her enemies with administration officials, particularly the president of the Federal Reserve Bank of New York, Timothy Geithner. Geithner is the first choice for the U.S. Treasury Secretary by the new administration. Bair had clashed with Geithner regarding aid to Citigroup Inc. Geithner is seeking for Bair’s ouster arguing her lack of team cooperation and focusing only on FDIC’s own insurance programs rather than programs focused on the entire financial system.

Citigroup is losing shares by as much as 65 percent after failing the ‘s takeover deal, which resulted to a collapse in investor confidence. Bair opposed the federal aid from the Treasury to shield Citigroup from losses, insisting on getting preferred shares for the FDIC. She also made demands for Citigroup to implement her proposed mortgage modifications program to stop foreclosures on their borrowers, the same way she is pushing Federal and Treasury officials to increase direct aid for homeowners in trouble of losing their homes to foreclosures.

Bair previously discussed a proposal during a House hearing on how the Treasury could use part of the $700 billion bailout fund as guarantee for loans that meet the requirements of a mortgage modification plan.

It is still not clear if Obama will retain Bair as FDIC Chairman, even as Obama’s economic team are opposing her retention. Obama is also favoring aid for homeowners but his new administration will have its own plan of helping millions of people in danger of losing homes to foreclosures.