FDIC's Bair: US Government Must Do More To Prevent Foreclosures
Tuesday November 18th, 2008 / 16h31
By Michael R. Crittenden Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The U.S. government needs to do more to prevent the record cascade of foreclosures that has caused the current financial crisis, a top U.S. banking regulator told lawmakers Tuesday. "As foreclosures escalate, we are clearly falling behind the curve," Federal Deposit Insurance Corp. Chair Sheila Bair said in prepared remarks before the House Financial Services Committee. "Much more aggressive intervention is needed if we are to curb the damage to our neighborhoods and broaden economic health." Bair's comments came during a joint appearance before the committee with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to discuss the $700 billion financial rescue package passed by Congress last month. Bair's position on foreclosures puts her on the opposite end of the issue from Paulson, who in his testimony before the committee Tuesday downplayed the need to use any of the rescue funds to help prevent cash-strapped borrowers from losing their homes. The FDIC and the Bush administration for weeks have battled over a Bair-favored plan to more aggressively address the foreclosure issue. Last week, the administration joined with Fannie Mae (FNM) and Freddie Mac (FRE) to announce a much more limited plan to address troubled mortgages that has already been panned by many lawmakers who say it doesn't do enough to deal with the crisis. More broadly, Bair said the banking industry continues to have a liquidity problem. "This problem originally arose from uncertainty about the value of mortgage-related assets, but credit concerns have broadened over time, making banks reluctant to lend to each other or lend to consumers and businesses," Bair said in her remarks. Bair said the FDIC, when it supervises the banks it regulates, plans to assess whether firms are using the capital they receive from the federal government to lend back into the economy. "These considerations are consistent with the precept that the highest and best use of bank capital in the present crisis is to support lending activity," she said. Bair also said the FDIC is considering changes to its temporary program to guarantee the senior unsecured debt issued by banks, which it will consider at a board meeting on Friday. "For example, we are considering suggestions with regard to whether the debt guarantee program should cover very short-term funding or whether we should have a tiered fee structure based upon the maturity of the debt guaranteed," Bair said. -By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=ca%2BNpgo7zosg6xjniF472A%3D%3D. You can use this link on the day this article is published and the following day.
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