Heads Will May Roll!
"The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous."I agree, Lizzie. But guess what? We already did! What now?
-Elizabeth Warren, Chair of the Congressional Oversight Panel to oversee the TARP
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.
It'll be interesting to see how this plays out. Is the Panel then recommending FDIC receivership? How does Warren see the shareholders getting wiped out? All common stock goes to Uncle Sam?
And who has the authority to act or not on the Panel's recs? Treasury? Can Geithner just give Warren the Heisman on this or is the ball in Congress's court now?
Clearly this has been a case of putting the (gold-plated) cart before the proverbial horse.
