This is a Good Idea

Once again, Sheila Bair shows that she, a George W. Bush holdover, is the only one in this administration who gets it.

She is proposing that the FDIC require that the rates paid underwriters and ratings agencies be determined by the performance of the instruments that they handle:

he Federal Deposit Insurance Corp. may force underwriters and raters of asset-backed securities created by banks to be compensated based on the bonds’ performance, an agency official said.

Such a requirement may be part of new rules for bank securitizations that the FDIC staff proposes at an agency board meeting next month, Michael Krimminger, special adviser for policy to FDIC Chairman Sheila Bair, said today in a telephone interview.

I'm sure that Timothy "Eddie Haskell" Geithner hates this idea, because it makes his Wall Street peeps responsible for their actions, but that's how he rolls.

Unfortunately, the scope is limited, because the FDIC's rules only apply to banks, and not their parent companies, but this is an idea that should be implemented industry wide.

It would cost Wall Street a lot of money, but f$#@ them, they have a lot of our money to begin with.