Obama keeps Republican FDIC chair
Sheila Bair's calls met resistance from Bush and banks.
WASHINGTON (Reuters) -- Democratic President-elect Barack Obama intends to retain Federal Deposit Insurance Corp. head Sheila Bair, who has pushed for fast mortgage modifications, according to a report Wednesday.
Citing Democratic officials, The Wall Street Journal said Obama plans to keep Bair, a Republican who has clashed with the Bush administration on how to stem home foreclosures and who was won support from key Democrats in the Congress.
Bair is chairman of a five-member FDIC board that includes two other banking regulators, the U.S. Comptroller of the Currency John Dugan and Office of Thrift Supervision Director John Reich - both Republicans.
Reich, whose agency regulated failed mortgage lenders Washington Mutual (WAMUQ) andIndyMac (IDMCQ), plans to retire within weeks, soon after Obama is sworn in; and Dugan, the regulator of some of the biggest national banks, plans to serve out his term.
Scott Polakoff, Reich's deputy, is expected to be the acting director.
The two Democrats on the FDIC board are Vice Chairman Martin Gruenberg, who was senior counsel to former Senator Paul Sarbanes, and Thomas Curry, a former state banking regulator.
A self-described moderate Republican, Bair was early in calling on institutions to quickly modify troubled mortgages in order to help borrowers and the financial markets get back on their feet.
Her calls were largely met with resistance from the Bush administration and from banks, which complained about legal and accounting issues that prohibited them from restructuring mortgages.
But her standing was on the ropes with Obama's pick for Treasury secretary, Timothy Geithner, who is president of the Federal Reserve Bank of New York.
According to congressional sources, tension has developed between Bair and Geithner, who was instrumental in the talks involving financial firm Bear Stearns and rescuing American International Group (AIG, Fortune 500) and Citigroup. (C, Fortune 500)
The tension centers on how Bair handled the recent tailspinning of financial institutions, especially Citigroup, which received more government aid. The two also differ on loan modifications, the sources said. 
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