FDIC Chief Fights To Save Its Might

The FDIC was set up in 1993 to rescue the banking system, and its deposit guarantees saved the industry in the present crisis.

The Senate Banking Committee under Senator Christopher Dodd has proposed to revoke all the supervisory powers of FDIC. If the committee succeeds, FDIC would end up cleaning banks after they fail and will have no powers to monitor them before problems erupt. FDIC Chief Sheila Bair who is up in arms against this proposal is pushing hard with panel members of the committee and has clashed bitterly with Treasury Secretary Timothy Geithner for saving FDIC.

If FDIC becomes powerless to enforce regulations on banks, it will be hard to predict the outcome of the next failure of banking giants like CitiGroup (NYSE: C) and Wells Fargo (NYSE: WFC).