TOP OBAMA OFFICIALS SPAR ON BANK PLANS

In politics as well as finance timing is everything.

And the timing of FDIC Chairwoman Sheila Bair’s “bad bank” rescue plan was troubling on both fronts – leaking out just as Treasury Secretary Tim Geithner was in the hot seat with the Senate and his confirmation vote Monday night.

Administration officials say that as Geithner was pleading his case to the Senate Finance Committee over his past tax problems, he was less involved in the planning sessions and conference calls involving Senior Economic Adviser Larry Summers, SEC Chairman Mary Schapiro, economic advisor Paul Volcker and Bair. Now sources said Geithner is keen to stop Bair’s strategy.

This is not the first time Geithner and Bair have butted heads over rescue plans. Last year, Bair asked Citigroup to rework the troubled mortgages on its books in order to save some homeowners.

This led to then-NY Fed President Geithner and Treasury Secretary Hank Paulson questioning Bair’s motives – suggesting she was promoting herself over a unified federal response. Geithner, like Paulson before him, favors rescuing the banks as opposed to homeowners.

Many banking-industry people favor giving Bair, whose term ends in 2011, the ball to take up the bad bank. “It doesn’t make sense to give the authority to anybody else but the FDIC,” said John Douglas, a former general counsel at the agency. “That’s what the FDIC does, it takes bad assets out of banks and manages and sells them.”

The FDIC has been modifying troubled mortgages held by failed leader IndyMac since July. Bair, a longtime advocate of foreclosure relief, said the initiative was meant to serve as a model for the mortgage industry.

In a sign of deference, FDIC spokesman Andrew Gray said, “Along with the other agencies, we continue to provide our best thinking on potential policy decisions. I would refer you to Treasury or the White House on direction and timing.”