Bailout Watchdog Head Will Call For Removal Of Top Executives
In other others there is a bailout watchdog group associated with the federal government
Elizabeth Warren, chief watchdog of America’s $700bn (:£472bn) bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration’s approach to saving the financial system from collapse.
Warren, a Harvard law professor and chair of the congressional oversight committee monitoring the government’s Troubled Asset Relief Program (Tarp), is also set to call for shareholders in those institutions to be “wiped out”. “It is crucial for these things to happen,” she said. “Japan tried to avoid them and just offered subsidy with little or no consequences for management or equity investors, and this is why Japan suffered a lost decade.” She declined to give more detail but confirmed that she would refer to insurance group AIG, which has received $173bn in bailout money, and banking giant Citigroup, which has had $45bn in funds and more than $316bn of loan guarantees.
Warren also believes there are “dangers inherent” in the approach taken by treasury secretary Tim Geithner, who she says has offered “open-ended subsidies” to some of the world’s biggest financial institutions without adequately weighing potential pitfalls. “We want to ensure that the treasury gives the public an alternative approach,” she said, adding that she was worried that banks would not recover while they were being fed subsidies. “When are they going to say, enough?” she said.
Good points, though, I am having some trouble getting past the notion that there is an actual oversight committee, which has either been MIA or completely ignored by the Congressional Critters and the Presidents Bush and Obama. But this is rather concerning, since anyone who decides they want to be in one of the top spots at any company that has received bailout money can be sent packing by the federal government on a whim. It should concern stockholders, too, who could lose all the money they invested. If we see people pulling out of companies who received bailout money, you’ll know why.
Maybe the watchdogs should be canned, too, since they have do such a wonderful job.
In related news, Timmay Geithner, who should be on the pink slip list himself, thinks banks who took federal assistance may be required to change leadership
“If, in the future, banks need exceptional assistance in order to get through this, then we’ll make sure that assistance comes with conditions, not just to protect the taxpayer but to make sure this is the kind of restructuring necessary for them to emerge stronger,” he told “Face the Nation” on CBS. “And where that requires a change of management of the board, we’ll do that.”
I’m thinking a dive of about 350 for the Dow today.