January 22, 2010
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
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.