Sheila Bair - FDIC Chief

Update 5: Let’s hear it for Gregory Meeks, D-Queens. He has enacted a program in his office to bring together counselors, servicers, lawyers and the homeowners to get foreclosures worked out. He had 8 people in his office saved from foreclosures the next day with this action.  Kudos for Greg Meeks.

CSPAN video of Panel 1 found here

Update 4: Panel 1 just wrapped up and Panel 2 is a series of insurance brokers and CEOs who would like a piece of this pie. Paulson was asked about the TARP legislation’s applicability to insurers and the trend as noted on the front page of today’s WSJ, of insurers buying banks in an attempt to make themselves eligible for TARP funds. Paulson indicated he is open to those insurers who held existing divisions/strategic business units that would have qualified as financial insitutions under TARP, but that he does not foresee opening TARP to these insurers who are making buyouts to become eligible.

Shorter version: these moves by insurers are one unintended consequence of TARP and will not be successful under Paulson’s management. One can expect the incoming Administration to take a different view.

Paulson repeatedly refused to consider the Big 3 as eligible under TARP and would not be moved from this stance. He went back to the ‘intent’ of the TARP over and over. Pretty ‘audacious’ considering his failure to address foreclosures, which almost every member of the Cmte indicated was the ‘intent’ of TARP from their perspective.  Rep. Frank entered into the record several pages of citations from the legislation that outline the powers of Paulson to modify mortgages under TARP.

When Paulson indicated comparing the recaptilization of the banks and the FDIC mortgage modification plan is like comparing apples with oranges, and noted that perhaps the Cmte could not see the forest for the trees,  Frank replied that the Cmte feels Paulson cannot see the orange grove for all the apple trees he is addressing.

Prediction: Sheila Bair’s plan is favored by the Congressional Democrats, and Chairman Frank is sure to propose legislation to enact it. Bair is asking for 24 billion under a conservative estimate that 33% of the modifications will redefault. This 24 billion represents the government’s end of the 50% payout if the modification redefaults.  This plan has worked on IndyMac and it will work on the broader market. Bair made it clear that ‘voluntary’ modifications will not get the job done. The Congress critters chimed in with multiple anecdotal evidence of just that. (Including Maxine Waters who is helping do workouts form her Congressional office and has spent hours with servicers who ‘just do not get it’ and has had to call the CEO of Wells Fargo in attempts to get these modifications acted on.)

Bair’s plan is one in which the banks are NOT forgiving principal, they are however waiving interest on some principal in some cases. (More on that later.) Here’s hoping we get Bair as mortgage Czarina (I have concerns about Pritzker’s IOU to the FDIC interfering with Bair’s appt., let’s hope the trend in appointing the best person over the nepotistic payback continues, she will I have no doubt ‘git r done’.

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