Agency’s Head Expects Banking’s Crisis to Worsen

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WASHINGTON — Sheila C. Bair anticipated the mortgage crisis long before most other regulators. But she never dreamed it would wreak so much havoc on so many banks.

More than a year after the credit crisis first flared, Ms. Bair, the chairwoman of the Federal Deposit Insurance Corporation, warned on Tuesday that the outlook for the ailing banking industry was bad — and getting worse.

The swelling tide of toxic home loans is proving to be even more worrisome than initially feared, Ms. Bair said. She is struggling to clean up the mess and forestall home foreclosures with a plan to ease loan terms for hard-pressed homeowners.

“It is going to be slog to work though this, but there is no easy way to do it,” Ms. Bair said about her plan during an interview in her office here. “We haven’t seen the trough of the credit cycle yet.”

http://www.nytimes.com/2008/08/27/business/economy/27bank.html?th&emc=th