Sheila Bair May Be Tapped To Monitor Foreclosure Settlement

12/12/2011 10:22 am ET

An outspoken critic of big banks and their mortgage practices leading up to the financial crisis may be tasked with making sure they comply with a long-awaited foreclosure settlement.

Sheila Bair, the former chairman of the Federal Deposit Insurance Corporation, is a leading candidate to become a third-party monitor in a foreclosure settlement between five big banks and government officials, Bloomberg reports.

Picking a monitor is reportedly one of the last issues to be worked out between banks and officials before the settlement becomes finalized.

Bair, who led the FDIC from 2006 until earlier this year, was one of the biggest critics of Wall Street leading up to and during the financial crisis, often putting her at odds with other officials including then-president of the New York Federal Reserve Timothy Geithner.

She warned of the dangers of subprime mortgage lending in 2001, well before most began sounding the alarm, according to the Washington Post. And she continued her push when she took over the FDIC, arguing that the growth of subprime mortgages would cause homeowners to later default, wrecking neighborhoods and hurting the banking system, according to The New York Times -- a sentiment that ultimately proved true with enormous consequence.

When the fallout from the crisis started to become clear, Bair fought for an aggressive mortgage refinancing program to help homeowners, according to WaPo. In addition, she pushed to give her agency a seat at the table when officials were figuring out the best way to save the financial system in 2008, the NYT reports.

The FDIC ultimately managed some failing institutions during the crisis, including Wachovia and Washington Mutual.

Bair's selection could be a boon for those who want to make sure lenders are held to their part of the settlement, as she continues to criticize too-big-to-fail institutions and regulator softness. Still Bair’s selection likely won't mollify those who think the settlement doesn’t go far enough to punish lenders whose policies allegedly forced millions to lose their homes.

If the deal between the five biggest mortgage lenders and the Obama administration and state officials gets pushed through, it would allow the lenders to settle without admitting wrongdoing. New York Attorney General Eric Schneiderman has been outspoken in his criticism of a deal that he says would wrongly release banks from future legal liability.

California and Nevada attorneys general announced last week that they would join together to prosecute mortgage fraud, which could weaken the national settlement. In addition, Massachusetts Attorney General Martha Coakley signaled her departure from the national talks when she filed a suit against the five biggest lenders for deceptive foreclosure and mortgage modification practices earlier this month.


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