As Bloomberg reports, the two disagree on how much influence the government should exercise on the banks’ managment and boards, with the FDIC having taxpayer protection taken to its heart and the Fed trying to protect the fragile ‘green shoots’ the Government has declared to exist and is adamant to protect.
The FDIC wants to have some accountability at management and boards of the banks especially those who need to raise money until November. The Fed wants that these decisions to remain with the boards and shareholders of those banks.
In this, the FDIC has most to lose as it guarantees some $342 bln of debt and insures about $4.7 trillion of deposits. It seems thus natural that Sheila Bair, the FDIC chairman, is keen on having a say about the fate of non-performing managers. The FDICs position is going to become worse once th PPIP starts.
The Fed stance is the usual one: Trust the ones that already have proven that they can’t manage anything and pay them for it handsomely. Whatever Ben is saying, he doesn’t act as if he had the taxpayers best interest in mind.
This is a good opportunity to support H.R. 1207, currently referred to a Committee it’s a bill introduced by Rep. Ron Paul, as well as the companion bill S. 604 introduced in the Senate, by Sen. Bernard Sanders. Please contact your Representative and Senators to let them know you support those bills.