FDIC chief : Hopes of home loan bailout

As Congress moves on the financial bailout plan, restructuring of troubled mortgages should be part of the final package, the head of the Federal Deposit Insurance Corp. said Tuesday.

FDIC Chairman Sheila Bair said she hoped that changes on home loans "will be a feature of that."

Under the $700 billion proposed bailout plan, the government could acquire troubled mortgage assets or provide a guaranty for delinquent loans, buying them and removing them from the overall pool of mortgages, Bair suggested.

Mortgage finance giants Fannie Mae and Freddie Mac, taken over earlier this month by the government which is operating them under a conservatorship, bought mortgages from banks and other lenders and guaranteed them in exchange for fees.

"We're highly supportive of Treasury's initiative," Bair said, stressing the need for a restructuring of distressed home loans in a comprehensive, streamlined manner.

Bair was speaking at a Brookings Institution conference on housing. She also reaffirmed that she believes it unlikely that the FDIC would have to use its "wide flexibility" to borrow from the Treasury if needed.

IndyMac failure sets back fund
The failure in July of Pasadena, Calif.-based IndyMac Bank tipped the federal deposit insurance fund - now at around $45.2 billion - below the target minimum level set by Congress, but Bair has said the agency's plan to raise the premiums charged U.S. banks and thrifts to replenish the fund likely will be sufficient.

"I think actually the banking sector is holding up pretty well," Bair said. The recent collapse of major investment banks and the cataclysm on Wall Street has shown that "there is some virtue to regulation. There is some virtue to leverage constraints," she said.

Investment banks have had more lenient guidelines in how highly leveraged they could become, with a much higher ratio of debt to their capital than commercial banks regulated by the FDIC that have access to the deposit safety net.

Referring to Treasury Secretary Henry Paulson and the current tumultuous events, Bair said, "Hank's got a whole lot of other people knocking on his door. I don't want to add to people knocking on his door."