Felix Salmon

Bair’s mortgages

By Felix Salmon
January 21, 2010

The Huffington Post Investigative Fund has done a lot of hard journalistic work in nailing down the facts about Sheila Bair’s mortgages, and I’m glad they did. Bair does seem to have received something of a sweetheart mortgage from BofA when she refinanced her Amherst house, and she shouldn’t have been negotiating in her FDIC capacity with BofA at the same time.

One thing which isn’t clear from the article is why Bair refinanced her Amherst house in the first place: is it because under the terms of the original mortgage she couldn’t retain it if she wasn’t living in the house? If so, then she should have asked some questions when BofA offered her a mortgage with what is presumably a more-or-less identical second home rider, saying that she had to keep the house for her “exclusive use and enjoyment” and could not use it as a rental or timeshare. It seems that Bair is violating the spirit of that rider at the very least: she’s making good money from renting out that house.

All that said, however, I don’t think this story is a huge deal. Bair had to move to DC, and she clearly wanted to buy a house there, as is her right. If she was going to buy a DC house, she was surely going to need a mortgage. And the FDIC would almost certainly have some connection with any bank she got a mortgage from. Sure, she could have recused herself from dealing with that bank, but that really wouldn’t have helped: if the bank was going to give Bair special treatment based on her position at the FDIC, it would surely do so whether or not she was recusing herself from discussions with that bank.

In the end, Bair got her jumbo mortgage at 6%, which seems to have been the going rate for such things. Unless we ban FDIC chiefs from taking out mortgages at all, I think that’s an acceptable outcome.

Update: Andrew Gray of the FDIC answers my question:

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.

3 comments so far | RSS Comments RSS

Did we ever figure out if Bernanke’s mortgage(s) were up to snuff?

Posted by Uncle_Billy | Report as abusive

If this is corruption, then count Sheila Bair as yet another underperforming member of the Obama administration.

George Bush’s FDIC head would have gotten a 3.25% rate and a $2M no-bid contract to sell the apples off the two trees in the front yard for resale by KBR in Iraq.

Posted by Dollared | Report as abusive

Sheila Bair IS George Bush’s FDIC head. She is a certified Republican appointed June 26th, 2006 for a five-year term.

Posted by Ed62 | Report as abusive

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