Insurance News

Geithner Says Government Would Remove Bank Chiefs if Needed

Posted on: April 9, 2009

WASHINGTON — Treasury Secretary Timothy Geithner said the federal government might remove top bank executives or board members if “exceptional” assistance is required to keep the banks operating in the future.

“When in the future — or I would say, 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,” Mr. Geithner said on CBS’s “Face the Nation.” “Where that requires a change of management and the board, we will do that.”

Both the auto and financial industries have received financial help from the government, but the Obama administration has come under criticism for taking a harder line with the auto industry than with Wall Street. Last month, administration officials pushed out former General Motors Corp. chief executive Rick Wagoner, after a federal auto restructuring task force determined he wasn’t restructuring the auto company fast or deep enough.

Mr. Geithner pointed to the Bush administration’s treatment of executives and board members at Fannie Mae, Freddie Mac, and American International Group Inc., to which the government gave major financial assistance over the last several months. Top executives and board members at those companies were replaced.

Top executives at Citigroup Inc. and Bank of America Corp., which have also received large government capital injections, haven’t been replaced, however. That has led to growing criticism on Capitol Hill that the White House was going easy on Wall Street.

Mr. Geithner suggested that the government would be aggressive in its effort to clean up bank balance sheets, though it remains unclear whether the Obama administration would force banks to sell bad assets into new government programs.

“We’ll do what’s necessary to make sure our banking system emerges out of this stronger because, again, economies depend on credit to recover,” he said. “We want to make sure they are strong enough to lend even if we go through a longer downturn.”

He rejected criticism that the Obama administration would try to evade new laws limiting the compensation of executives of companies that participate in government rescue programs.

“Our obligation is to apply the laws that Congress just passed on executive comp and we’re going to do that,” Mr. Geithner said. “Now, we’re also going to make sure that these programs are as effective as possible in making credit more available to businesses and families across the country.”

Mr. Geithner said the economy was showing “encouraging” signs, particularly with mortgage rates, which are at extremely low levels. But he said there was “a lot of pain and suffering across the country.”

“We need to keep acting as forcefully as we can,” he said.

He declined to say whether the Obama administration might ask for another stimulus package from Congress. “I can’t make that judgment at this time,” he said.

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