It would seem to me that if Obama is serious about reaching out to Republicans, keeping Sheila Bair on as head of FDIC is a no-brainer. Yet Treasury nominee Geithner does not support her. I can't figure out what Bair did wrong (and I'm not being snarky). Consider:
Geithner became increasingly wary of Bair as she worked with the other regulatory agencies on emergency bailouts of banks in recent months. The New York fed chief has been concerned that Bair was more worried about keeping the FDIC's insurance program protected than she was about the entire financial system, one person said.Bair twice sparred with her colleagues at the Fed and Treasury over efforts involving Citigroup. In October, she acquiesced to Wachovia Corp.'s agreement to a takeover by Wells Fargo & Co. days after agreeing to back an initial deal with Citigroup. Geithner was concerned that allowing the Citigroup transaction to fail would inhibit other lenders from working with the FDIC on any subsequent rescues, the people said.
Wells Fargo offered about $15 billion for Wachovia, compared with Citigroup's $2.2 billion deal to acquire Wachovia's banking operations, and didn't need any FDIC aid....
Bair held out for concessions as the Fed and Treasury sought to shield Citigroup from losses in its holdings of toxic assets. Bair insisted on getting preferred shares for the FDIC in the New York-based bank. She also demanded that Citigroup agree to implement mortgage modifications according to a model developed by her agency.
So, making sure that in return for bailing out Citigroup, Bair tried to minimize the cost to the taxpayer and make sure that people wouldn't lose their homes. This is bad, how exactly? Because throwing all of that money at banks has really freed up credit lines and stopped foreclosures, hasn't it?
But what's really odd about this story is this comment by Democratic congressman Barney Frank:
"I think part of the problem now, to be honest, is Sheila Bair has annoyed the 'old boys' club,'" Frank said today. "To some extent, bank regulation and mortgage foreclosure have made a situation where we have several regulators up in the tree house with a 'no girls allowed' sign -- and it's aimed at Sheila Bair - - who's been really good."
Frank could have phrased this differently. He didn't have to refer to latent (or overt) sexism when describing Bair's situation. Frank could have just referred to 'Bair protecting Main Street' or some other similar phrase.
What's struck me about the whole bailout was how grounded in hysteria the whole operation was. Now, I don't mean Paulson et al. ran around shrieking and fainting--after all, that is 'what women do.' But they were extremely panicked, and rather than calmly working the situation, they freaked out. We needed a bailout plan RIGHT NOW! So we had the sorry spectacle of Paulson and a bunch of other sleep-deprived middle-aged men (and they were almost entirely men) isolating themselves from other people in an economic situation room, "hammering out" a bailout--no doubt using their Big Swinging Cocks.
Because that's a great way to decide the future of an economy.
If you've ever been in a real crisis situation, there (hopefully) are a couple of people who manage to keep their shit together. They don't panic. But too often, you get a bunch of guys who are panicking, but, because they are doing so in socially acceptable, manly ways, it's not seen as panic.
(and if this sounds like any of the other Bush Administration reactions to crisis.... let's just say that for a bunch of guys who consider themselves to be 'tough' and not "squishy", they do squeal a lot...)
I have no idea what was said in private, but it seems to me that Bair didn't lose her shit during the crisis by realizing that a few days of tough negotiations wouldn't make a differnce, unlike the architects of the bailout--a bailout which hasn't led to relaxed credit.
The girl was smarter than the scared boys.
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Not just smarter but more rational. That's the icing.
Hmmmm... Hysterical, or opportunistic?
"Give us all your money or the economy gets it."
Hah Dunc, I wish those guys were just opportunistic shameless scumbags.
But their ineffectual flapping seems to suggest that mike has it right. They are panicked.
The girl was smarter than the scared boys.
Yeah!!! Kick those boys in their Big Swinging Cocks!!!
Mike, it's not clear whether you were criticizing Barney Frank's remark, but it's accurate. Bair insisted on doing the right thing, and the boys reacted by forming something like the GROSS club from Calvin and Hobbes. (For those who don't know the reference: the acronym stands for "Get Rid Of Slimy girlS.")
The financial industry has long been a draw to the sort of man who is susceptible to testosterone poisoning. The key difference is that when a banker succumbs to testosterone poisoning, it's Other People's Money rather than his own body that takes the hit. Bair thought that the regulators should take steps to minimize the hit to Other People's Money (at least that of Main Street; institutional investors should have known the risks and therefore ought to bear the brunt of the hit). In this case the old boys' network preferred to say, "What testosterone poisoning problem?" Result: a bigger than necessary hit to Other People's Money.
The reports that Paulson was at work with a bailout plan for three months before the hurry up offense was put into play with the Congress suggests that this was not hysterical but opportunistic. If so, then Blair's problem is that she is not a player on Team Paulson, and the right people are not getting their rewards. That, in turn, makes Geithner's non-support significant and problematic.
"She also demanded that Citigroup agree to implement mortgage modifications according to a model developed by her agency."
The model that's had about a 50% failure rate at Indymac. So far. Though, admittedly, that's not really much worse than anybody else's program. Yeah, she wanted Citi to get Wachovia to provide cover for guaranteeing their toxic crap, so much better than the explicit guarantee of the toxic crap Citi got anyway. Barney Frank has no better idea than anyone else. He just wanted a bailout of some sort, wasn't too keen on paying attention to details. I'm not real convinced that Bair has done much better than any of the other players.
Interesting post, holmes.
Hmmmm... Hysterical, or opportunistic?
"Give us all your money or the economy gets it."
Alas, think you are right on. For a candidate who promised change, the econs in the new administration are awfully same old same old. But Geithner appointment is the most disappointing. He is definitely one of the chickens had his hands raised saying the sky is falling. Thank goodness Wachovia went to Wells. Citi is - and was when it lost the Wachovia bid - defunct. And one last comment - not paying his taxes? no excuse! that obligation was clearly revealed to him by the IMF.
boring!!
thanks