Homeowners should benefit from the bailout just as much as the large financial institutions, according to Federal Deposit Insurance Corporation (FDIC) chairman Sheila Bair in an interview with the Wall Street Journal yesterday. The bailout package, which provides $700 billion to financial firms reeling from a loss of capital due to the credit crisis, insufficiently addresses the root of the crisis—homeowners faced with mortgage foreclosures in the first place.
Bair and the FDIC have gained exposure in recent weeks as the federal government has worked to sell the bailout package to both the country’s financial institutions and the public at large. The FDIC is responsible for guaranteeing company debt, and has thus emerged from its relative obscurity in times of financial stability.
Bair was cautiously critical of the federal bailout in her interview: “I support all the measures…that have been taken. But we’re attacking it at the institutional level as opposed to the borrower level, and it’s the borrowers defaulting. That’s what causing the distress at the institutional level. So why not tackle the borrower problem?”
The FDIC attempted to shore up borrower positions earlier in the year, starting in April by attempting a proposal that the Treasury make loans to up to a million homeowners in hopes of stemming foreclosures. But Bair cited a general unwillingness of the federal government to protect homeowners specifically, saying in the interview, “It’s been a frustration for me.”