Washington's Consumer Advocate: The FDIC's Sheila Bair

FDIC head Sheila Bair is inspiring some of her fans to say that she's the only consumer advocate on Capitol Hill. Bair has been aggressive about loan modification strategies as a foreclosure prevention plan to help the average homeowner. But she's not liked by everyone.

From frenetic stock picker Jim Cramer to her fan club of FDIC staffers, Sheila Bair, the chairperson for the FDIC, has lots of people cheering for her. Long before she became something of a household name, investment wizard Warren Buffett praised her as a genius and an ideal candidate for the post of Treasury Secretary.  Many people respect her for her efforts at homeowner protection and foreclosure prevention, but she also has her share of critics who dislike her proactive stance regarding loan modifications. She's gotten little support from the Bush administration in particular, and Ben Bernanke and Henry Paulson, who head the Federal Reserve and Treasury Department, respectively.  They eclipse her most of the time when it comes to public policy, Congressional hearings, and media coverage.

Bair supports foreclosure prevention

Bloomberg News has also reported that Tim Geithner, President-elect Obama's pick to head the Treasury starting next year, doesn't want to see Bair in a position of power within the new administration.  Geithner, currently the president of the Federal Reserve Bank of New York, doesn't consider her a "team player," and has lobbied for her to be replaced. Many, like Geithner, who come from the banking community, don't like her approach to modified refinance of homeowner loans and FDIC modified mortgage strategy implementation. Bair is considered a radical consumer advocate, and her particular background is not that of a banker or Wall Street player because she spent most of her career as a serious and cautious bank auditor and regulator.

Legislative support

Thanks in part to her approval ratings on Main Street, and despite her disapproval within the ranks of banking executives, Bair has managed to gain support of many legislators. Members of Congress have, for example, introduced proposals that would usher in large loan modification programs designed to resemble those Bair uses at the FDIC. If those ideas go into effect, they'll be paid for with proceeds from Treasury Secretary Paulson's super controversial $700 billion bailout plan-officially titled the Troubled Asset Relief Program (TARP).

Fed Chairman Bernanke has also followed Bair's lead by calling for more aggressive foreclosure prevention action. He specifically recommends taking the modified refinance and modified mortgage loan approach that Bair instituted for the failed IndyMac bank, a loan modification idea that Bair has been calling for since last year. Sadly, her warnings of an avalanche of homeowner foreclosures were ignored by mortgage and banking executives. They could have probably saved themselves -and the entire country-a great deal of financial pain and loss if they had listened to her a year ago, and gotten busy doing drastic modified refinance packages to rework bad loans.