Bank Bailout News: TARP Oversight Chaperone Elizabeth Warren Slams Tim Geithner Again
TARP Watchdog, Elizabeth Warren, making a hand gesture in reference to Tim Geithner.
The cynical title aside, I'm a huge fan of Harvard's Elizabeth Warren and the work she is attempting to do as the head of the COP (Congressional Oversight Panel) for the first $700 billion of TARP bailouts. The problem, as I've written before, is she has no juice. Congress chose to give Paulson a green light and the appointment of Warren to head the oversight panel was mere public relations.
She can issue reports, hold press conferences and write editorials from here until 2012, but none of it actually means anything. If you were wondering why Tim Geithner has avoided all of her questions and accusations, it's because he can.
After testimony last week in front of the Senate Banking committee, the Guardian is reporting tonight that Warren will call for sweeping changes to the Obama administration's approach to the bank bail outs, including the dismissal of mangement at Citigroup and AIG.
From the Guardian:
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.
She said she did not want to be too hard on Geithner but that he must address the issues in the report. "The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous."
The report will also look at how earlier crises were overcome - the Swedish and Japanese problems of the 1990s, the US savings and loan crisis of the 1980s and the 30s Depression. "Three things had to happen," Warren said. "Firstly, the banks must have confidence that the valuation of the troubled assets in question is accurate; then the management of the institutions receiving subsidies from the government must be replaced; and thirdly, the equity investors are always wiped out."
Elizabeth Warren criticizes Obama, Geithner, Bush and Paulson
Oversight Panel public hearing last week (video)
Warren testifying before the Senate Banking Committee last week (video)
Apr 6, 2009 at 1:25 AM
Reader Comments (12)
Larry Summers, Tim Geithner and Wall Street's ownership of government
http://www.salon.com/opinion/greenwald/2009/04/04/summers/index.html
Federal Reserve chief Ben Bernanke and Treasury Secretary Tim Geithner are making headlines, but people like John Squier and Dan Fries are in the trenches of America’s economic crisis.
Appraisers like Squier and Fries are engaged in a seemingly impossible job — estimating property values when prices are plunging and relatively few people are buying homes.
http://www.ajc.com/business/content/business/stories/2009/04/05/home_appraise_atlanta.html?cxntlid=patrick.net
Geithner Says Government Would Remove Bank Chiefs if Needed
http://online.wsj.com/article/SB123894739672790347.html#mod=testMod
The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials.
Administration officials have concluded that this approach is vital for persuading firms to participate in programs funded by the $700 billion financial rescue package.
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/03/AR2009040303910.html?hpid=topnews
http://jameshowardkunstler.typepad.com/clusterfuck_nation/
Closing graf:
"As I've averred more than a few times in this space before, the standard of living in America has got to come way down. We mortgaged our future and the future has now begun. Tough noogies for us. But the broad public won't accept the reality of this as long as the grandees of finance and their myrmidons appear to still enjoy the high life. They've got to be brought down hard, perhaps even disgraced and humiliated in the courts, and certainly parted from some of their fortunes -- if only in lawyer's fees. Mr. Obama pretty much served notice to this effect last week, telling a delegation of bankers in the White House that he was the only thing standing between them and "the pitchforks." It's possible he understands the situation."
"They've got to be brought down hard." Where's Al Davis when you really need him?
"the DJIA is likely to converge with the current Georgia pollen count. I'm long Claritin and Krugerrands. "
Those of the highly-leveraged balance sheet and nasal cavitiy suffer the most. It's a shame more didn't clear the nasal decks before the bust.
Kunstler Nation
Snippage:
My guess is it will first take the form, sometime after Memorial Day (but maybe sooner) of wholesale liquidations of everything under the North American sun: companies, households, chattels, US Treasury paper of all kinds, and, of course, the S & P 500. We'll soon find out whether an organism the size of the United States can run an economy based on one family selling the contents of its garage to the family next door. My guess is that this type of economy won't support the standards of living previously enjoyed in places like Dallas and Minneapolis.
Now Mr. Meese, don't you have some contra work still to do? A job unfinished is not work but simple travail.
Al Davis is in the jungle of Ecuador on a 2-week soul-finding tour with jon gruden.
As long as Al and Jon are in the Ecuadoran jungle they should visit Baños; it will be an illustrative visit. Much like the US economy it was a really pleasant place to vacation until it was consumed by a hot, molten lava flow of pain.