WASHINGTON — Sheila Bair comes out swinging in a new book released Tuesday, blasting Treasury Secretary Tim Geithner as the "bailouter in chief," while detailing fierce regulatory battles before, during and after the financial crisis.
The former Federal Deposit Insurance Corp. chairman's nearly 400-page "Bull By the Horns" is chock-filled with meaty details about the behind-the-scenes debates over the 2008 bailouts, the Dodd-Frank Act and beyond.
Although American Banker is still reviewing the full text, following are several new revelations from the book:
1. Hamp was doomed to fail, and Geithner didn't care
The book recounts Bair's ongoing efforts through two administrations to help the government create a plan to assist troubled homeowners. But she is particularly frustrated by Geithner's failure to adopt recommendations from the FDIC over how to construct its Home Affordable Mortgage Program, which she says was too complicated and provided too few incentives for servicers to participate. Ultimately, Bair concludes Geithner and Larry Summers, one of the White House's top economic advisors, never really cared about the program or helping homeowners.
"HAMP was a program designed to look good in a press release, not to fix the housing market," Bair writes. "Larry and Tim didn't seem to care about the political beating the president took on the hundreds of billions of dollars thrown at the big-bank bailouts and AIG bonuses, but when it came to homeowners, it was a very different story. I don't think helping homeowners was ever a priority for them."
2. Geithner was too invested in bailouts, before and after the crisis
Bair's criticism of Geithner, which is an ongoing theme of the book, is grounded in what she sees as the Treasury chief's efforts to continually throw money at the largest financial institutions in an attempt to shore them up. Upon hearing of President Obama's nomination of Geithner, Bair likened it to a "punch in the gut."
"I did not understand how someone who had campaigned on a 'change' agenda could appoint someone who had been so involved in contributing to the financial mess that had gotten Obama elected," she writes. "Tim Geithner had been the bailouter in chief during the 2008 crisis. If it hadn't been for my resistance and the grown-up supervision of Hank Paulson and Ben Bernanke, we would have spent even more money bailing out the financial bigwigs and guaranteeing all their debt. As president of the NY Fed, Tim had been responsible for regulating many of the very institutions whose activities had gotten us all into trouble."
3. Citigroup "should have been led to the pillory"
Bair provides an insider's account of the three bailouts of Citigroup, arguing forcefully that Vikram Pandit was ill-equipped to deal with the company's problems and that Citi should have been used as an example to others. She says the FDIC came close to downgrading Citi to a 4 on the Camels scale—a move that Bair acknowledges would have been "nuclear," perhaps even causing Citi to collapse. She attempted to use the FDIC's leverage over the rating to make significant changes at the company, including forcing it to sell off its assets in a bad-bank structure.
But Bair describes Geithner as defending Citi at every turn, even working with Pandit to ensure he remains CEO. "Tim seemed to view his job as protecting Citigroup from me, when he should have been worried about protecting the taxpayers from Citi," she says.