Obama Aid Calls for the Firing of Top Bank Executives
Elizabeth Warren, a Harvard law professor and chair of the congressional oversight committee monitoring the goverment's Troubled Asset Relief Program (TARP), is now calling for the firing of the nation's top bank executives if the economy is to have any chance of recovery. Warren says that letting banking leaders off the hook for the mess their companies are in will plunge the country into an even deeper hole.
In an interview last week, Warren said:
"The management of the institutions receiving subsidies from the government must be replaced."
She specifically picked on the head of Citigroup, but will recommend all bailout recipients replace their top-level management. Warren also noted that failure to take such action in past financial crises, such as in Japan in the 1990's when they government gave out cash but left bank leaders in their jobs, drastically slowed recovery.
"It is crucial for these things to happen. 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," said Warren.
In addition to the firings, Warren said that other essentials needed to ensure the survival of the banks include accurate valuation of the troubled assets currently being held, and wiping out current shareholders.
Warren's conclusions were drawn from a detailed study of the historic banking crises in Japan and Sweden, the Great Depression, and the US savings and loan crisis of the 1980's. These findings and conclusions are expected to be published in a report due out this week.
Warren has declined to give further detail on the report, but did mention that she specifically points out AIG and Citigroup.
US Treasury Secretary Timothy Geithner said last week that he would be willing to fire bank CEOs who took the bailout cash. Last week, the Obama administration pressured General Motors CEO Rick Wagoner to step down. It looks like heads might soon be rolling in the financial industry as well.