FDIC's Bair raps U.S. govt for not helping homeowners: report

A foreclosure sign in front of a home at 1456 Albillo Loop in Perris, California in this May 2, 2007 file photo.

(Reuters) - The U.S. government's $700 billion rescue package will help stabilize financial markets but it doesn't do enough to address home foreclosures, Federal Deposit Insurance Corp Chairman Sheila Bair was quoted as saying on Wednesday.

"Why there's been such a political focus on making sure we're not unduly helping borrowers but then we're providing all this massive assistance at the institutional level, I don't understand it," Bair told the Wall Street Journal in an interview.

Bair didn't single out government officials or leaders, but her criticisms brushed on decisions made by both the Bush administration and Congress, the paper said.

"I support all the measures; I've been a part of all the measures that have been taken," she said.

"But we're attacking it at the institution level as opposed to the borrower level, and it's the borrowers defaulting."

Bair's comments came amid growing tensions with key policymakers in resolving the financial crisis, notably Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, the paper said citing people familiar with the matter.

The Bush administration defended the measure.

"We just did a massive bill that does a lot for homeowners," the paper quoted White House spokesman Tony Fratto as saying.

However, another prominent Republican, presidential candidate John McCain, said he sided with Bair.

"I agree with the chairman of the FDIC who said that the Secretary of the Treasury and this government is not doing enough to help people stay in their homes. That's got to be our first priority," McCain told a campaign rally in Downingtown, Pennsylvania.

(Reporting by Ajay Kamalakaran in Bangalore and Jeff Mason in Pennsylvania)