January 22, 2010

Dear Colleagues:

Several people have asked me about an article published by the Huffington Post Investigative Fund (HPIF) alleging wrong doing by FDIC Chairman Sheila Bair with respect to a mortgage she obtained from Bank of America. I have reviewed the article by Keith Epstein and David Heath of the HPIF and frankly I am appalled. This article is, in my view, a hideous piece of garbage that lacks any thread of truth. There is no story, no smoking gun, just a lot of innuendo and malicious speculation about one of the finest people I know in American public life.

I call upon the authors and the HPIF, and Ariana Huffington, to retract this story immediately and to apologize to Chairman Bair for this outrageous hatchet job. More, I believe that the directors of the HPIF, which is a 501(c) non-profit corporation, need to immediately initiate an investigation into this article and the authors to discover just how such a weak and clearly malicious story could be published. This article suggests to me that there is a complete breakdown in the internal systems and controls at HPIF. Were it not for the fact that Chairman Bair was a public official, in my view the HPIF would surely be facing a liable litigation for this malicious and unwarranted attack.

I am including the statement by Andrew Gray of the FDIC below. If you have any questions about the HPIF article, please contact Andrew at AnGray@FDIC.gov

Yours truly,

Christopher Whalen
www.rcwhalen.com

++++++++++++++++++++++++++++++++++++

FDIC Statement:

FDIC spokesman Andrew Gray said, “The facts speak for themselves. Chairman Bair received no preferential treatment in her dealings in obtaining these mortgages that were fully documented with large down payments. The terms and rates were available to all eligible borrowers at the time, and were at market rates and were comparable to those offered to her family from other institutions. In addition, it has been determined by the FDIC’s Legal and Ethics Office that the Chairman did not engage in any action that would create a conflict of interest or appearance of a conflict of interest.”

“There is absolutely no evidence of any wrongdoing here. Indeed, all of the facts are on the Chairman’s side. The Huffington Post Investigative Fund should be embarrassed to publish an article that ties together points in time without any regard to merit or context. The Huffington Post Investigative Fund purports to operate under high standards of journalistic integrity, but this “gotcha” piece is specifically designed to mislead and misconstrue the facts. I would urge them to disclose the motivations and discussions that led to this ridiculous article.”

The article states:

Huffington Post Investigative Fund: “Sheila Bair, one of the chief regulators overseeing Bank of America’s federal rescue, took out two mortgages worth more than $1 million from the banking giant last summer during ongoing negotiations about the bank’s bailout and its repayment.”

• This timeline is flat out wrong. Bank of America received government assistance in late 2008 and early 2009, long before Chairman Bair’s family began discussions with lenders about financing the purchase of a home in Washington. Discussions on TARP repayment did not begin until November of 2009, long after these mortgages were settled.

Huffington Post Investigative Fund: “In the weeks between the closing on her two mortgage loans, Bair met with Bank of America’s chief negotiator in the bailout talks.”

• Her family mortgage terms were locked in for both loans by June 23rd, 2009. Both mortgages were settled by August 11th under the same terms previously locked in. The Greg Curl meeting was a courtesy meeting that he requested. There was no discussion of TARP repayment. The FDIC was not informed of BofA’s interest in repaying TARP until November 2009, long after the mortgages had been negotiated and settled.

Huffington Post Investigative Fund: “Bair did not seek or receive an exemption until last week, when her agency gave her a retroactive waiver from the rules after an inquiry…”

• It has been determined by the FDIC’s Legal and Ethics Office that the Chairman did not engage in any action that would create a conflict of interest or appearance of a conflict of interest. The FDIC’s Chief Ethics Officer determined that she was not involved in any activity that required a waiver. He also determined that during the timeframe of May 1st 2009 through the present, there was no conflict of interest or even appearance of a conflict of interest.

Huffington Post Investigative Fund: “raise questions about whether she and her husband should have qualified for the terms that they received.”

Huffington Post Investigative Fund: “At the request of the Investigative Fund, a mortgage broker asked two loan officers working at Bank of America if a borrower could qualify for a second-home loan with a renter, using similar details as Bair’s loan involving a separate living quarters for the renters.”

• The Chairman’s husband sought quotes from two lenders for these loans. Chairman Bair’s husband took the lead in discussions on both mortgages. The Amherst home was refinanced from a 15-year to a 30-year fixed to lower the payment. After attempts to sell the house failed, Chairman Bair’s family found themselves in the position, like tens of thousands of families across the country, of having to carry two mortgages.

For the Amherst property, a community bank stated that they were willing to view it as “a second home subject to the appraiser confirming that the property has an apartment that was currently being used as a second property.” Both lenders were aware that a portion of the property had been rented, and would continue to be under lease, but the remainder would be available exclusively to the Bair family. Although the interest rate was significantly lower on the community bank offer, the family decided to accept the BofA offer because it provided a 30-year fixed product. Chairman Bair’s family has repeatedly used the apartment for vacation and family visits.

The lenders obviously made their judgments taking into account LTV, credit history and other personal financial information that the Huffington Post Investigative Fund would have been unable to duplicate.

Huffington Post Investigative Fund: “The FDIC’s ethics office, said he had done a review and – without Bair asking – granted her a waiver from the rule retroactive to March 1, 2009.”

• She received a determination from the FDIC’s Chief Ethics Officer that during the timeframe of May 1st 2009, through the present, there was no conflict of interest or even appearance of a conflict of interest. She was not required to notify the Ethics Office of these mortgages until the financial reporting period beginning this month.

Huffington Post Investigative Fund: “The rules state that “No FDIC employee may participate in an examination, audit, visitation, review, or investigation, or any other particular matter involving an FDIC-insured institution….”

• The FDIC’s Chief Ethics Officer made a determination that she was not involved in any activity that required a waiver. He also determined that during the timeframe of May 1st 2009 through the present, there was no conflict of interest or even appearance of a conflict of interest.

Huffington Post Investigative Fund: “Bank of America, among the world’s largest financial institutions, received $45 billion in federal bailout money.”

• This was a Treasury TARP decision, supported by BofA’s primary regulators, the Federal Reserve and the Office of the Comptroller of the Currency. That being said, these were all decisions made well before May 1st 2009, when Chairman Bair’s husband first reached out to lenders, including BofA, on financing a home purchase in Washington.

Huffington Post Investigative Fund: “the FDIC board voted in January 2009 to guarantee more than $100 billion in risky assets held by the bank.”

• The ring face transaction referenced here required the FDIC to backstop $2.5 billion in losses, not $100 billion. This is a factual error. In Chairman Bair’s testimony, she indicated that she was reluctant to participate and questioned whether the ring fence was necessary. This backstop was part of a joint Treasury/Fed/FDIC program to stabilize financial markets. Again, this decision finalized in January 2009 was made well before Chairman Bair’s family began discussions with lenders about obtaining a mortgage.

Huffington Post Investigative Fund: “Bair’s deputy signed the agreement on Sept. 21st, 2009, records show.”

• The decision to release BofA from the ring fence occurred on September 21st, through an inter-agency process, with negotiations led primarily by Treasury. The Legal and Ethics Offices have determined that this was not a particular matter for the Board. As the article indicates, it was signed by the FDIC’s CFO, a long term career government servant.”

Huffington Post Investigative Fund: “By the summer, Bank of America also began pushing for the right to pay back the TARP money…”

• The FDIC was not notified about BofA’s interest in TARP repayment until November 11th 2009. This timeline that is used is flat out wrong. In addition, this whole point is irrelevant because the obligations of the mortgagors (Chairman Bair and her husband) and the mortgagee (BofA) became fixed by June 23rd at the time of the lock-in.

Category: Bailouts, Legal, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Article on Sheila Bair by HuffPo Investigative Fund”

  1. elnino says:

    Story probably planted by Tim Geithner….

    The writers probably think she doesn’t have a right to an FDIC insured bank account either. Give me a break.

  2. Mannwich says:

    @elnino: Great point. One of Sheila’s adversaries probably wants to push her out. This is how a hatchet job is done.

  3. sharkbait says:

    What’s HuffPo got against Sheila Bair? She is one of the VERY FEW “good guys” in gov’t financial agencies/depts., IMHO. Shapiro at the SEC – and the SEC – is a useless appendage in that regard. The list of that ilk goes on and on…

    If Chris Whalen is supporting her, then who can be against her? Chris, and Institutional Risk Analytics are some of the rare bright lights illuminating the true malfesance, malinvestment, and maladroitness of those who brought on the current financial collapse, and its aftermath.

    We certainly need more people of integrity in high places. Let’s not cast aspersions on those doing a good job. Focus on those who deserve it!

  4. cognos says:

    Sheila Bair is awful. C’mon she was head of the FDIC and did nothing to protect despositors, institutions, or the insurance fund in 2006, 2007, and 2008. Then she did nothing to prevent the massive bank run in Q4 2008, Q1 2009. She was outspoken against banks and seems all for closing as many as possible.

    Oh wait, then banks and all credit rebounded 50-100%… nice yo-yo effect. Thats what I need regulators like SB for… add volatility, please!

    William Issac (former head of the FDIC in the early 80s)… has been out there saying all the right things since at least early 2008. He has been shocked by the incompetence of govt regulators including SB. He has said on many occasions, if he had handled things the same way… he could’ve bankrupted all the major commercial banks in the early 80s. He didnt. He came up with some “crisis alternatives” and when they looked back 5-yrs later… such measures were very appropriate.

    I dont care about her mortgage or some little political favors (it happens). I dont like bad journalism. But I also dont like incompetent regulators and she is one. She was appointed in 2006. Did she pass or fail?

  5. bsneath says:

    Wow, the Huffpo just went down a notch on the credibility meter. Lets hope this is an aberration and not a trend.

    I read your piece with a critical eye – where there is smoke, there often is fire. But in this instance the smoke is clearly being blown up our arses by that tobacco thingy machine you posted a few months back.

  6. deanscamaro says:

    Is that the greed and political motivation bell I hear ringing???? Not only do the financial institutions use intense political contributions to sway policy, but also underhanded manipulation of the facts to sling crap on office holders who don’t do things their way.

  7. Mannwich says:

    @cognos: Timmy? Is that you?

  8. MorticiaA says:

    Kudos to Whalen for speaking out.

    I avoid HuffPo just as much as I avoid MSNBC and Fox News: partisan hacks with an agenda, in the disguise of “journalism.”

    One of the signs of Colbert’s brilliance is when he coined the word “truthiness.” I want to come up with something similar for journalism, but I’m just not as smart as Stephen.

  9. slyng1 says:

    While I agree that this seems like a bit of a hatchet job, couldn’t the response have been proofread a bit better?

    “Were it not for the fact that Chairman Bair was a public official, in my view the HPIF would surely be facing a liable litigation for this malicious and unwarranted attack.”
    –I think he means “libel”

    Bullet #8: The “ring face” transaction?
    – I think he means “ring fence”

  10. rileyx67 says:

    Loved the “Is that you Timmy?” comment above. Am mostly a moderate Dem (but fiscal Conservative) and also avoid reading the HuffPo due its “political slants”.
    Sheila Bair should be running Treasury, and have a lot of respect for Shapiro as well.
    Got the two books she (in her spare time!?) wrote on finances for kids and gave to granddaughters as much to show what a woman can become as for their content.
    Incidentally, if can show malicious intent, a public official CAN sue for libel…at least that was the case in my 1962 Journ Libel course!

  11. philipat says:

    As an aside to the “Chair Bair” issue, yes this has all the markings of an orchestrated retaliation, but it would be great to have some insights into WHY the big O started listening to Tall Paul, who was in the wilderness for so long, and now ignoring Timmy? Wouldn’t it be wonderful to see the same switch in sentiment for Treasury?

  12. The Window Washer says:

    slyng1:

    No one hear gives a fuck aboot your spel check critic;

    I think everyone is impressed with how fast a government employee got it out.

  13. DeDude says:

    No surprise that there are lots of people out there who would want to place sh!t in the face of Sheila Bair, she has always been a disobedient little girl with concerns about the publics interest, and the big boys hate that. It is such an obvious thing that our financial masters would put a hit on her to make sure that she does not advance into one of the big financial positions that are about to open (the minute someone blows dust up around her she becomes a less attractive candidate for 6-12 months). The puzzling thing is that our financial masters could get HuffPo to become the mouthpiece for something like that, are they really that completely clueless and naive about the Washington game that their editors never analyze who will benefit from a story? At least the right wing media tools know that they are hookers and enjoy it.

  14. DeDude says:

    Wonder if HuffPo is also going to “do” Volker. We knew from the beginning that Timmy and possibly Larry were going into such huge problems that they could not be solved in a year, and that at least one of them would have to be replaced before the midterm elections, as a sacrifice to stem the losses. Now it looks like even Ben may have to be sacrificed. The two people that our financial masters are most scared of seeing in any of these positions of power are Sheila and Paul, so they have to be slandered with something. Maybe they had an affair???? HuffPo has done tabloid stuff before and a geriatric sex-affair would be something new ;-)

  15. chasft says:

    Is there anything that some a$$hole who tried to steal $35,000 from the IRS wouldn’t try?
    Probably not.