The Bush Administration’s bailout plan bails out Wall Street but ignores demolished consumers, FDIC head Sheila Bair says–and she blames politics. Her criticism gets at the reason why the bailout plan has so far failed to unlock the credit markets: because banks are now unwilling to lend money to people who can’t pay them back.
“Why there’s been such a political focus on making sure we’re not unduly helping borrowers but then we’re providing all this massive assistance at the institutional level, I don’t understand it,” [Bair] said. “It’s been a frustration for me.”
Ms. Bair didn’t single out government officials or leaders, but her criticisms brushed on decisions made by both the Bush administration and Congress. For example, she described painstaking efforts made by lawmakers in crafting the federal Hope for Homeowners program to make sure it limited resale profits for borrowers who received affordable home loans.
Ms. Bair, who was nominated by the White House and confirmed by the Senate in 2006, has frequently said government and industry efforts to prevent foreclosures aren’t effective enough. She has long defended her focus on consumer protection as an important role for the FDIC, which is charged with protecting bank deposits.
Her comments Wednesday came amid growing tensions with key figures in resolving the financial crisis, notably Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, according to people familiar with the matter.