US watchdog calls for bank executives to be sacked

[CHIMO]

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."

http://www.guardian.co.uk/business/2009/apr/05/useconomy-regulators

[MasonJar]

1. Elizabeth Warren is the real thing. I have seen her several times on

Rachel, and she certainly does know what she is doing. She also understands that the current plans are faulty. She is a serious advisor/investigator who is not receiving big pay backs from financial institutions.

[FlyByNight]

2. The forcefulness and eloquence of her statement is really appreciated

"The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous." Hear! Hear!

:thumbsup:

[Demeter]

3. Keep Digging, Elizabeth. Take The Pyramids Down--ALL of Them!

lest we all perish from the lies.

[elleng]

4. She has said recently, in the last few days to Congress,

that Treasury is NOT COOPERATING with her/their efforts to report on whats going on; Treasury has not provided the needed info/reports.

[chill_wind]

10. Yes.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x8308756

[Mojorabbit]

5. That will send the

stock market tanking Mon. Still it needs to be said and I am glad she is releasing the report. I really think they are only propping up these banks to avoid another collapse of the international banking system like what almost happened after Lehmans was allowed to fail.

[EVDebs]

6. Wm. Black, on Bill Moyers last night, Treas breaking the law

The Treasury is violating the Prompt Corrective Actions law by not putting the failed banks into receivership.

[chill_wind]

7. Be still my heart! Now THAT's a government servant and Watchdog

ladies and gentleman. Wow!

K & R.

[jonestonesusa]

8. Amen!

Good money after bad with no oversight is not a policy change. Thank you, Professor Warren!

[scentopine]

9. Obama Geithner and Summers - Very Weak Team

Watching Obama's team negotiate with these scumbag CEOs is like watching Chamberlain negotiating with Hitler. This foolishness will be Obama's legacy. These corrupt and too powerful people need to go, the institutions broken down. I don't know how any democrat can watch this spectacle. Utterly maddening. People have every right to be enraged at this.

There are more outrageous CEO salary stories breaking every day - the media is again refusing to deliver the information the public needs to be informed out the outrageous pillaging by this gilded class of crooks.

ArrrrrrrggH. Please - is it the pharmaceuticals in the public water systems? Or are we just to dumb to understand what is happening in front of our very eyes?

We need a good ol populist woodshed for these CEOs!!!!!!

[mbperrin]

11. Thank you, Ms. Warren!

Now, admin, make it so!!!!!!!!!!!!

[Kablooie]

12. Yes. We have to let the decrepit system collapse before it can be rebuilt. Patching won't work.

[Jim Sagle]

13. Just another shrill Krugmanite pinko.

:sarcasm:

[pnorman]

14. Interesting article on that same webpage --"Financial Meltdowns of the Past"

http://www.guardian.co.uk/business/gallery/2008/oct/15/archive-past-financial-turmoil?picture=338629471

pnorman

[snot]

15. K&R'd

If they're sacked before she is, maybe I'll start believing in "change."

[HCE SuiGeneris]

16. Reported by the UK press.

Now, where is our MSM on this...? Are they doing their jobs?

Thank you, Ms. Warren!

[chill_wind]

20. Very interesting, isn't that?

That was the first thing I went searching for when this broke here last night.

[wolfgangmo]

28. Where are our MSM on this issue?

Why they are where they always are.

On their knees smokin' a chubby and hoping for one more payday score just like any other whore. (no offence to whore who are much more honest than the MSM bums in this country. - we don't have journaists, we have PR)

[blueworld]

17. Warren is 24-karat

She is absolutely correct. I've posted this link elsewhere on DU but it bears particular relevance here:

http://www.theatlantic.com/doc/200905/imf-advice

[chill_wind]

19. That's a really good article! Fully expose the rot. n/t

At the root of the banks’ problems are the large losses they have undoubtedly taken on their securities and loan portfolios. But they don’t want to recognize the full extent of their losses, because that would likely expose them as insolvent. So they talk down the problem, and ask for handouts that aren’t enough to make them healthy (again, they can’t reveal the size of the handouts that would be necessary for that), but are enough to keep them upright a little longer. This behavior is corrosive: unhealthy banks either don’t lend (hoarding money to shore up reserves) or they make desperate gambles on high-risk loans and investments that could pay off big, but probably won’t pay off at all. In either case, the economy suffers further, and as it does, bank assets themselves continue to deteriorate—creating a highly destructive vicious cycle.

To break this cycle, the government must force the banks to acknowledge the scale of their problems. As the IMF understands (and as the U.S. government itself has insisted to multiple emerging-market countries in the past), the most direct way to do this is nationalization. Instead, Treasury is trying to negotiate bailouts bank by bank, and behaving as if the banks hold all the cards—contorting the terms of each deal to minimize government ownership while forswearing government influence over bank strategy or operations. Under these conditions, cleaning up bank balance sheets is impossible.

Nationalization would not imply permanent state ownership. The IMF’s advice would be, essentially: scale up the standard Federal Deposit Insurance Corporation process. An FDIC “intervention” is basically a government-managed bankruptcy procedure for banks. It would allow the government to wipe out bank shareholders, replace failed management, clean up the balance sheets, and then sell the banks back to the private sector. The main advantage is immediate recognition of the problem so that it can be solved before it grows worse.

The government needs to inspect the balance sheets and identify the banks that cannot survive a severe recession. These banks should face a choice: write down your assets to their true value and raise private capital within 30 days, or be taken over by the government. The government would write down the toxic assets of banks taken into receivership—recognizing reality—and transfer those assets to a separate government entity, which would attempt to salvage whatever value is possible for the taxpayer (as the Resolution Trust Corporation did after the savings-and-loan debacle of the 1980s). The rump banks—cleansed and able to lend safely, and hence trusted again by other lenders and investors—could then be sold off.

Cleaning up the megabanks will be complex. And it will be expensive for the taxpayer; according to the latest IMF numbers, the cleanup of the banking system would probably cost close to $1.5trillion (or 10percent of our GDP) in the long term. But only decisive government action—exposing the full extent of the financial rot and restoring some set of banks to publicly verifiable health—can cure the financial sector as a whole.

This may seem like strong medicine. But in fact, while necessary, it is insufficient. The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.

[Joe Chi Minh]

18. Women are nearly always the major-league whistle-blowers. They seem to expect the world to be run on

rational lines. And thank goodness for that. "What's that?" they ask? "It's not what you know. It's who you know? That can't be right!"

And so they try to re-establish order. I'm always getting into trouble for not waiting for the "little green man" to appear, before staggering across the road.

[JDPriestly]

24. Women do not get their jobs because they belonged to the same

fraternity as they guy giving the job. Women get their jobs because they work hard, get good grades in school and perform. Successful women have one thing in common -- they have made huge sacrifices to get where they are.

[Joe Chi Minh]

27. Got it in one.

[natrat]

21. look for her to be fired , slandered and prosecuted soon by the obama doj

[chill_wind]

25. It's not difficult to think Summers will go after her-

(x-posting from another thread) He has a history...

Brooksley Born, chair of the Commodity Futures Trading Commission during the late 1990s, had the foresight at the time to understand that Summers' position on derivatives was deeply problematic. She argued that an unregulated derivatives market posed serious systemic risk and began taking steps to establish a framework for oversight.

Summers and Rubin, together with Alan Greenspan, went to great lengths to marginalize Born and eventually succeeded in derailing her efforts. Recent events have underscored the soundness of her position, but Summers has failed to concede his error, maintaining that Born's positions were "deeply problematic." This raises an important point -- without any distance from the worst policy mistakes of the Clinton administration, Summers has no incentive to offer an honest critique of these errors and guide the country in a different economic direction.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5390809&mesg_id=5396191

http://www.prospect.org/cs/articles?article=the_summers_bubble

[Dr.Phool]

22. There is some sanity in Washington, after all.

I took the liberty of posting a link to this thread in the Weekend Economists thread.

[Vidar]

23. Applauding Ms. Warren.

[merkins]

26. Time For Your Haircuts Bondholders

"...set to call for shareholders in those institutions to be wiped out. 'It is crucial for these things to happen...'"

How about a stiff haircut for the bondholders and defaults on the credit default swaps held by JP Morgan and Goldman Sachs?

[katty]

29. thanks Ms. Warren for doing your job

[Stinger2]

30. Michael Milken Still at Large, Worth $2 Billion, 1980s buyout craze with junk bonds

World's Billionaires #334 Michael Milken Still at Large Worth $2 Billion

Fueled 1980s buyout craze with junk bonds, padded fortunes of The Forbes 400: Carl Icahn, Ted Turner, Ronald Perelman, Henry Kravis. Pleaded guilty to 6 counts of securities fraud in 1990. Served 22 months.

http://www.forbes.com/lists/2009/10/billionaires-2009-richest-people_Michael-Milken_SSM6.html


From Milken To Madoff: White Collar Crime In Focus

http://www.npr.org/templates/player/mediaPlayer.html?action=1&t=1&islist=false&id=99120924&m=99120906

WALL STREET WITHOUT WALLS

http://dallasfed.org/ca/events/2005/05wallstreet_bios.pdf

It pays to be a white collar crook, why? because they make the laws and prosecute them, it’s called no accountability.