Monday, April 06, 2009

Geithner Open to Possible Ouster of Bank Chiefs

Treasury Chief Says He's Open to Ousting Heads of Frail Banks, New York Times

U.S. Prepared to Oust Bank Chiefs, Financial Times

In an interview Sunday, U.S. Treasury Sec. Timothy Geithner said that the government was open to the idea of removing the chiefs and/or senior management teams of certain U.S. banks. Specifically, Geithner suggested that the government may require the removal of high ranking bank executives and directors as a condition of those banks receiving high levels of government aid or bailout funds.

Geithner offered the possibility of ousting bank executives in response to a question challenging the Obama Administration's choice to fire General Motors CEO Rick Wagoner while leaving bank executives untouched. Sec. Geithner first highlighted the government's (under the previous administration) decisions to change the leadership at AIG, Fannie Mae, and Freddie Mac, long before any discussion of ousting auto executives. He then made clear his--and the Administration's--willingness to remove failing bank executives, suggesting that such removals could be required "not just to protect the taxpayer but to make sure this is the kind of restructuring necessary for [the banks] to emerge stronger."

In addition to opening the door to possible leadership changes at American banks, Sec. Geithner also used his Sunday interview to fervently dispel rumors and suggestions that the Treasury Department was structuring certain banks' bailout agreements in a way that would allow those banks to circumvent some compensation limitations and requirements placed by Congress in the bailout legislation. “Our obligation is to apply the laws that Congress just passed on executive comp[ensation], and we’re going to do that.”

Discussion Questions:
1) Should the government, as part of its bailout packages, have the power to compel the removal of executives in banking, automotive, or any industry?
2) Is the government employing a double standard to the auto and banking industries?

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