October 30, 2008
Homeowner Protection et al
Posted by David Zaring

The latest move by the government would dedicate $50 billionish of the bailout money to guarantee some distressed mortgages.  The Post gives you some of the as yet unclear details, I'll note only:

  • The deal is between Treasury and the FDIC, the White House is skeptical ... trust the Post to outline the politics of the deal first.
  • But since we're in the world of politics, it's worth noting that FDIC head Sheila Bair is doing very well out of this crisis; better, I would warrant, than Christopher Cox, in that it looks like she's actually participating in shaping the government response.  I suspect that DC veterans wouldn't have thought that the flacks and politicos at the FDIC, the sleepiest government agency, had it in them.
  • The FDIC isn't really charged with playing a part in the TARP by the bailout statute (in section 126 of that statute it got some anti-fraud authority unrelated to the crisis given to it, there's the increase in deposit insurance in section 136 to $250k, and that includes the ability to borrow money from Treasury if necessary, to meet obligations), and it guarantees deposits in banks, not mortgages for banks, so there's lots more to learn about how this program will be structured and why the outfit is even involved.

Also, those worried that banks are getting too good a deal on the bailout money are wondering why they're using that money to pay shareholder dividends, rather than make loans.

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