US Treasury Secretary Timothy Geithner said he’s prepared to oust executives and directors at banks that require “exceptional” assistance from the US government.
“If in the future, banks need exceptional assistance in order to get through this, then we will make sure that assistance comes,” while ensuring taxpayers are protected, Geithner said yesterday in an interview on the CBS ‘Face the Nation’ program.
“Where that requires a change in management and the board, then we will do that.”
Mr Geithner noted that American International Group, Fannie Mae and Freddie Mac had their chief executives removed after it became clear the companies couldn’t survive without government rescues.
The Treasury is reviewing how much capital the biggest US financial companies need in order to endure a severe economic downturn.
“Where we’ve had to do exceptional things, the government has replaced management and boards, Mr Geithner said.
Mr Geithner’s pledge comes as signs emerge that the world economy may be stabilizing. Confidence among US consumers climbed last month from the lowest level on record, according to the Conference Board.
UK house prices rose in March for the first time since October 2007, while Chinese manufacturing increased, reports last week showed.
Federal bank regulators will meet early this week to discuss how to interpret the results of the so-called stress tests that are being conducted to determine how much capital the nation’s 19 largest banks need, the Wall Street Journal reported yesterday, citing unidentified people familiar with the matter.
Mr Geithner, in the CBS interview yesterday, vowed to enforce congressional legislation that limits pay at companies receiving government loans. Mr Geithner said the Obama administration has no intention of letting banks get around the rules.
“Our obligation is to apply the laws that Congress just passed,” he said. “We want the American taxpayer’s assistance going to generate greater lending, not providing excess compensation.”