Thread: FDIC Chief Bair: Regulators Ready for Awful 2010

FDIC Chief Bair: Regulators Ready for Awful 2010

Thursday, December 11, 2008 6:00 PM



WASHINGTON -- The housing crisis likely will last into 2010 until the credit market revives and government rescue programs have time to make an impact, the head of the Federal Deposit Insurance Corp. said Thursday.

FDIC Chairman Sheila Bair said regulators were bracing for a difficult year ahead as the economy staggers under the worst crisis since the 1930s and mounting job losses push new multitudes of struggling home borrowers into default.

"We think we're going to have a tough year next year, and we're preparing for that," Bair said in an interview with The Associated Press. "But we'll work through it."

"By 2010 we'll be seeing the light at the end of the tunnel," Bair said.

She spoke as industry reports showed the number of U.S. homeowners dragged into the housing crisis fell in November to the lowest level since June as new state laws lengthened the foreclosure process.

More than 259,000 homes nationwide received at least one foreclosure-related notice last month, down 7 percent from October, but 28 percent higher than a year ago, according to RealtyTrac.

The government's rescue plan includes hundreds of billions of dollars in direct federal investment in U.S. banks, as well as an FDIC program of three-year guarantees for as much as $1.4 trillion in new loans between banks.

The goal is to thaw the credit freeze gripping the economy and encourage banks to lend, Bair said.

But on action to provide struggling homeowners the ability to switch into affordable loans and help stanch the foreclosure wave, "we're still behind, very much behind, the curve," she added.

Debate on that issue has been intensifying as Democrats, including President-elect Barack Obama, insist that the government must use some of the $700 billion in bailout funds to halt rising foreclosures.

That also is the stance of Bair, an independent regulator and moderate Republican, who broke with the Bush administration in pushing her proposal to use $24 billion in government bailout funds to help 1.5 million borrowers avoid foreclosure by guaranteeing modified home loans through the end of next year.

Bair said she "wished a structured program would have gotten under way sooner" and expressed frustration several times during an hourlong interview about not having seen her plan prevail. But she said, "I think we do need to look forward. There are a lot of borrowers to help."

A change of posture could come with the new administration.

Bair said she has "a good working relationship" with Obama's designated nominee for Treasury secretary, New York Federal Reserve President Timothy Geithner, with whom she helped negotiate terms of the government's multibillion-dollar rescue of Citigroup Inc. in intense talks over the weekend before Thanksgiving.

Bair convinced Geithner and Treasury Secretary Henry Paulson in those discussions that Citigroup should be required to modify mortgages to help distressed homeowners as a condition for the government agreeing to shoulder hundreds of billions of dollars in possible losses at the bank.

"I have a lot of respect for him," Bair said of Geithner. "He's a very bright guy and he's got a real policy sense."

http://money.newsmax.com/streettalk/bai ... ode=744B-1

The housing crisis likely will last into 2010 until the credit market revives and government rescue programs have time to make an impact, the head of the Federal Deposit Insurance Corp. said Thursday.

Yea, and trashing the dollar through devaluation and the printing press doesn't mean a damn thing, does it!

Originally Posted by Rockfish

The housing crisis likely will last into 2010 until the credit market revives and government rescue programs have time to make an impact, the head of the Federal Deposit Insurance Corp. said Thursday.

Yea, and trashing the dollar through devaluation and the printing press doesn't mean a damn thing, does it!

I think deflation is something we should be more concerned about, not inflation, at this moment. If the money supply is not freed up, we're going to see consumer spending drop even further and that will only mean further layoffs. Deflation is something that can spiral out of control and the government would not be able to do anything about. On the other had, inflation can be controlled via the fed interest rate.