Geithner says he’s open to firing failing bank executives
The U.S. government may require new faces in executive suites at banksrequiring "exceptional assistance" in the future, Treasury SecretaryTimothy Geithner said Sunday.
The U.S. government may require new faces in executive suites at banks
requiring "exceptional assistance" in the future, Treasury Secretary
Timothy Geithner said Sunday.
Critics of the Obama
administration's move last weekend to force out the chairman of General
Motors Corp., Rick Wagoner, as a condition for possible additional
federal loans say that strong government intervention contrasts with
measures placed on the financial industry in return for billions in
Geithner denied there was a double standard and put
banks on notice that they may need to change leadership teams in
exchange for accepting more money in the future.
"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."
The treasury chief said that is what has happened
at some big institutions that are getting large amounts of government
aid. They include the mortgage companies Fannie Mae and Freddie Mac,
which were placed into conservatorship by the government last
September, and insurer American International Group Inc., the recipient
of more than $170 billion in help since last fall.
seen a substantial number of the largest banks in our country fail or
be absorbed by other institutions, no longer existing as independent
institutions. And where the government has acted, like in Fannie and
Freddie or like in AIG, where we've had to do exceptional things to
stabilize them, we have replaced the management and the board,"
"And we've done that because we want to make sure
that taxpayers' assistance is going to make these companies stronger,
make sure there's accountability, make sure it comes with strong
conditions. And we'll do that in the future if that is necessary," he
"It's a single standard, a single principle. And our
obligation to the American people is to do what's necessary to try to
bring recovery back on track as quickly as possible."
chief executives of big banks such as Citibank and Bank of America
should worry about their jobs if their companies don't improve their
performance, Geithner said the government would not shy from such a
"Where that's necessary, where it meets the test,
where it's necessary to do what we ... exist to do, which is to make
sure that this financial system supports recovery and the banks emerge
stronger," Geithner said.
As part of the new administration's
overhaul of the $700 billion bailout effort, banking regulators are
requiring stress tests for the 19 largest banks to see whether they
will need additional support to withstand a more severe downturn than
the country is experiencing now.
Those tests are scheduled to be
completed by the end of April. After that, the banks in need of
additional capital will be given time to raise it on their own.
they are not able to do so, they will be provided with extra support
from the bailout fund. But the administration has said the additional
support will come with tougher requirements to make sure the banks' are
using the money to increase lending to consumers and businesses.