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Sheila Bair Wants You to Know That Sheila Bair Is Innocent: Street Whispers

"Since Vikram Pandit became CEO during the financial crisis, Citi has executed a strategy based on returning to the basics of banking and building a culture of responsible finance.," the bank said in a statement in response to Bair's comments. "Citi has built industry-leading financial strength, reduced its non-core businesses and assets by over $600 billion, and returned to profitability. It is a simpler, smaller, safer and stronger institution than it was 5 years ago and this record speaks for itself."

Bair also talks about her frustration with the government's efforts to help homeowners. Geithner failed to adopt her recommendations for the Home Affordable Modifications Program (HAMP), which she said was too narrow and would help too few people.

"HAMP was a program designed to look good in a press release, not to fix the housing market," Bair writes. "Larry[Summers] and Tim[Geithner] didn't seem to care about the political beating the president took on the hundreds of billions of dollars thrown at the big-bank bailouts and AIG bonuses, but when it came to homeowners it was a very different story. I don't think helping homeowners was ever a priority for them."

With juicy quotes like that, the book promises to be an entertaining read, at least for those who want to relive the reality horror show.

But more depressing is her view that TARP might have been unnecessary.

"In retrospect, the mammoth assistance to those big institutions seemed like overkill. I never saw a good analysis to back it up. But that was a big part of the problem: lack of information. When you are in a crisis, you err on the side of doing more, because if you come up short, the consequences can be disastrous," she writes.

Her disappointment and regret about the bailout is evident in her interview with CNBC. "..We didn't help homeowners, we didn't tackle mortgages the way we should have, we never cleaned up bank balance sheets which continue to be a drag on the economy, and the horrible public cynicism toward Washington and large financial institutions and this perception that the game is rigged was created by the bailouts."

The initial reaction from the media and the general public seems to be overwhelmingly in favor of Bair's account of the crisis.

Clearly, Wall Street has a long way to go in repairing its reputational damage.

But as Oppenheimer analyst Chris Kotowski pointed out in a report Tuesday, that's no reason not to invest in bank stocks.

According to the analyst, banks are suffering from a problem of perception, with the reality being that fundamentals are actually improving. "...To us, that bespeaks opportunity because the essence of investing is to find a gap between perception and reality," Kotowski wrote. " In our view, the industry's reality is that it is steadily recovering from a cyclical trough while the perception, propagated by politicians and reporters everywhere, is that because they "caused" the financial crisis, bank stocks are somehow too icky to touch and therefore "uninvestible"regardless of the fundamentals or valuation."

"While "Wall Street" will probably always be a convenient object of scorn on which politicians, reporters and the public at large can blame all of "Main Street's" woes, the reality is that the economy needs a financial system with financial institutions to intermediate financial risks," he added.

-- Written by Shanthi Bharatwaj in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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