Congressional oversight committee recommending tough love in the form of goodbyes to top executives and shareholder wipe outs.
Congressional Watchdog to Drop a Bombshell on the US Financial Industry
Courtesy of Jesse’s Café Américain
"…set to call for shareholders in those institutions to be wiped out. ‘It is crucial for these things to happen…’"
How about a stiff haircut for the bondholders and defaults on the credit default swaps held by JP Morgan and Goldman Sachs?
It will be most interesting to see how Tim Geithner and Larry Summers respond to this advice from Congressional oversight.
The Guardian UK
US watchdog calls for bank executives to be sacked
James Doran in New York
The Observer,
Sunday 5 April 2009
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…
Full article here.
