The Wall Street Journal's

Damian Paletta, citing "people familiar with the matter," writes of a


Basically, if the story is to be believed, Bair is the only federal regulator who is pushing to rein in the giant bank—and to ditch its CEO.

It may not be coincidental that Bair's agency has the most exposure to Citi losses, having agreed to an unprecedented $300 billion "loss sharing" deal.

The story has its juicy bits, including the claim that, after Bair backed a surprise takeover of Wachovia by Wells Fargo over Citi's bid, Pandit unleashed obscenities about her during a 2 a.m. conference call. But the story's main points are all about policy—and the important question of just who gets to oversee a colossus like Citi. It's clear who the bank prefers:

The bank is too big to fail, too big to succeed, and too big to regulate, it seems. Kelly left out the 50 state insurance commissioners who regulated Citi's various insurance subsidiaries until it sold those in 2005, and arguably should have been allowed to regulate the credit default swaps (insurance by another name) in which its finance arms and hedge funds involved themselves.

Citi is not an academic issue. As the WSJ reminds us, we all own 34 percent of it now. And this "turf battle" among the regulators is also relevant, if not well-timed:

Root for Bair, I think. Back during the last banking scandal, the one populated by quaint little billion-dollar S&Ls filled with what now look like minor-league crooks, FDIC officials seized them despite their executives' protests. The S&Ls each in turn claimed to be solvent; the FDIC, according to its investigator at the time, "knew they were lying."

This time it's different, not because the banks aren't lying about their solvency, but because they're now so powerful they can scare the government into propping them up.

Citi is like an elephant, its regulators like the proverbial blind men who strained to describe it by touch.

Bair has her hand near the beast's business end, though, and her nose seems to be telling her something her fellows ought to be smelling by now.