We knew this was coming…the Bair/Paulson Smackdown.
This is truly a rare event to watch two government agencies open up a public battle for power and leadership. The sides are aligned: Treasury Secretary Paulson/White House versus FDIC Chairman Bair (a Bush appointee)/Congressional Democrats.
The strategy seems clear–Paulson is playing to hold the line for the next 9 weeks and Bair is playing for a longer term opportunity with the new Obama White House.
Paulson stuck to his reversal in TARP policy and directly assualted tne new Bair/FDIC loan modification plan:
Paulson reiterated his opposition to using any of the money to buy mortgage-backed securities or individual mortgages, although that was his original plan in September when he asked Congress for an unprecedented amount of money to keep global credit markets going.Paulson also opposed a proposal introduced Friday by Federal Deposit Insurance Corp. Chairwoman Sheila Bair, who is seeking to use $24.4 billion of the $700 billion authorized by Congress to modify loans and avert 1.5 million foreclosures.
Meanwhile, Bair seems to be ready to push forward without the blessing of the Treasury, and may have the Congressional horsepower to do so:
Bair said the FDIC would adopt a Temporary Liquidity Guarantee Program rule on Friday that would seek to unlock inter-bank credit markets and “restore rationality to the credit markets.”Bair’s proposal would guarantee new, unsecured debt issued by banks, thrifts and bank holding companies issued between Oct. 14 and June 30. According to her proposal, debt issued cannot exceed 125% of senior unsecured debt that was outstanding as of Sept. 30 and scheduled to mature before June 30. The program provides insurance coverage for deposits typically used by corporations for payroll expenses.
Looks like Bair is acting a bit like the Secretary of Treasury, even if President-elect has not anointed her.
(photo credit: snerkie)
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