Sheila Bair: Off the Reservation?

Sheila Bair, the Chairwoman of the FDIC, gave a very interesting speach the other day where she basically proposed that her agency be given resolution trust type authority to put the large zombie banks like Citi and BankOfAmerica in a receivership process (often denigrated as “nationalization” by opponents) similar in substance to the process by which the FDIC has managed the failure of institutions like IndyMac.  Besides being in general agreement with the Geithner/Summers plan dissenters like myself, Krugman, Johnson, Stiglitz, et al., this somewhat subtle but very public critique of the administration’s failings raises some important questions regarding the behind the scene politics.  It seems impossible that the President is unaware of Mrs. Bair’s position, and the fact that it is in opposition to that of Geithner/Summers.  Will the administration quietly move towards the Bair solution against the will of the current Treasury wise guys?  Is she a rogue agent that will ultimately be marginalized like she was by the Bush administration?  The FDIC is fairly independent and certainly Bair’s opinion does not carry the weight of those in the President’s cabinet.  We can only hope that this is a promising development.