Federal Deposit Insurance Corp. Chairman Sheila Bair on Wednesday criticized the federal government for failing to take more aggressive steps to prevent Americans from losing their homes, blaming political reluctance.

The administration’s sweeping $700 billion rescue package would help stabilize financial markets, she said in an interview with The Wall Street Journal, but it doesn’t address the root of the crisis: home foreclosures.

‘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,’ she said. ‘It’s been a frustration for me.’

Ms. Bair didn’t single out government officials or leaders, but her criticisms brushed on decisions made by both the Bush administration and Congress. For example, she described painstaking efforts made by lawmakers in crafting a new Federal Housing Administration program that limits the ability of homeowners to benefit if their property values rise.

Ms. Bair, who was nominated by the White House and confirmed by the Senate in 2006, has frequently criticized government and industry efforts to prevent foreclosures. Her comments Wednesday come amid growing tensions with key figures in resolving the financial crisis, notably Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

The Bush administration’s rescue plan is designed to tackle problems at the heart of the banking industry, in particular the loss of public confidence in financial institutions. Officials say the freezing up of many financial markets threatens consumers and businesses by choking off the credit that is the lifeblood of the economy.

‘We just did a massive bill that does a lot for homeowners,’ said White House spokesman Tony Fratto. ‘You are always going to have different views on some specifics on policy. But I think we’re all trying to pull in the same direction.’

But Ms. Bair’s comments provide new fodder for critics of the government’s response to the financial crisis, especially among those who say it has done too little to help families falling behind in their mortgage payments.

‘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. That is what’s causing the distress at the institution level. So why not tackle the borrower problem？’

The FDIC, the agency charged with protecting bank deposits, has accumulated increasing power as it has become a central player in the government’s rescue plan. In recent weeks, it has tackled some of the largest bank failures in U.S. history, and now is charged with guaranteeing not only consumer bank deposits but new debt issued by companies. That move, announced Tuesday, was part of a broader series of efforts to get credit flowing again.

Ms. Bair has argued the plan should have a bigger focus on homeowners, whose travails are at the heart of the current crisis. Until home prices stop falling, financial markets and the economy are unlikely to stabilize.

The agency’s growing role has given her views a more prominent platform after spending much of this year arguing her point from the sidelines.

Ms. Bair and the FDIC have gained enormous clout in the last year as the financial crisis wreaked havoc on the banking system. (Forbes magazine recently ranked her as the second most powerful woman in the world.) Her agency is central to the government’s plan to stabilize the banking sector, temporarily offering unlimited deposit insurance for non-interest bearing accounts and backing roughly $1.4 trillion in new unsecured bank debt.

Negotiations over details of the deal proved tense, with U.S. officials rushing to catch up with their foreign counterparts and the U.S. stock markets reeling. Last week, Ms. Bair met Messrs. Paulson and Bernanke and the two men tried to convince her to offer the debt guarantees to a broad range of institutions and types of debt, according to people familiar with the matter.

Ms. Bair, who declined to comment on the meeting, was initially resistant and eventually sought a formal legal opinion over whether such measures would be valid. A day after the discussions, she sent a memo to the Treasury Secretary and Fed chairman proposing a compromise. Rather than guarantee bank debt up to 100% of their value, she proposed guaranteeing them up to 90% of their value. The debt guarantees were eventually limited to 100% of unsecured debt issued by June 30 with three years or less of maturities.

The federal government has launched multiple efforts since last year to help homeowners rework distressed mortgages. The programs, which have been largely voluntary for the mortgage industry, have done little to reverse the trend of rising foreclosures. Falling home prices in some areas have continued putting pressure on banks and homeowners. A giant program created by Congress this summer to help homeowners started just two weeks ago.

Ms. Bair, a one-time Republican congressional candidate and children’s book author, had suggested direct action to modify mortgages en masse before many other regulators in Washington. In April, she pitched a plan that would authorize the Treasury Department to make loans to as many as one million homeowners to minimize foreclosures. In July, after failed thrift IndyMac Bancorp Inc. reopened its doors under FDIC control, the agency said it would halt foreclosures on the mortgages it owned and would try to modify loans for struggling homeowners.

Her stance has led to tangles with government officials, including a disagreement with White House Chief of Staff Joshua Bolten, a longtime colleague, over a newspaper article she penned about a new proposal to help homeowners avoid foreclosure. Ms. Bair declined to comment on the exchange. ‘We are an independent agency, and we’ve been talking about this a long time,’ she said.

The public image of the FDIC, which was created during the Great Depression, comes and goes in waves. It had a huge presence during the savings-and-loan crisis of the 1980s and 1990s, and has re-emerged as a key player. Ms. Bair was one of the regulators who sat across the table from top bank executives Monday at the Treasury Department when the final details were unveiled.

‘The decisions we’re making are historic,’ she said. ‘How many times can you be in public service when you know that the decisions you make will go into history books？ How will future generations judge what we’re doing？ I think about that a lot.’

Her term as chairman of the FDIC lasts until mid-2011 and her term on the FDIC board lasts until 2013. Ms. Bair said she would stay in her role if the new president allowed her. If she leaves, she said, she would likely return to academia.

Damian Paletta