Catfight! Geithner Doesn't Like Bair

Oh dang! Rumor has it that Tim Geithner, our Treasury Secretary-to-be, does not care for our beloved Sheila Bair and her maverick ways. Bair is the chairman of the FDIC and one of the few high-profile Bush administration appointees to very repeatedly and publicly bang the drum about how if our financial crisis is ultimately due to people's mortgages going south, maybe we ought to work on fixing those bad mortgages. She's a working class hero! So naturally, Giethner hates her guts.

The problem is that she isn't a "team player" or a huge fan of Citigroup, and for this she must be banished forever from Washington:

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. ... 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.

Citigroup's position weakened, with its shares losing as much as 65 percent after the failed Wachovia deal amid a collapse in investor confidence -- precipitating another rescue attempt.

Again, 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.

(Ha ha, sorry for the long-ass quote, your editor is waiting for the Sudafed to kick in.)

Anyway, here is one interpretation of the story: Sheila Bair is the one regulator who has not been screaming bloody murder about how we must bail out all the fancy New York lenders who horribly mismanaged everything, preferring to focus instead on all the impoverished rubes who completely overleveraged themselves with stupid mortgages they couldn't ever hope to pay off. This makes Bair unpopular among certain financial types. Also, Tim Geithner is maybe a dick.

Geithner May Seek to Push Bair Out After Clashes During Crisis [Bloomberg]


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