US gov't ready to force out banking bosses
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The US government is prepared to force out the bosses of banks who ask for more bailout money, and replace them with new management, the country's Treasury Secretary Timothy Geithner said on Sunday night in a televised interview.
AFP - The US government stands ready to force out banking bosses and install new management if their companies have to return for more bailout money, Treasury Secretary Timothy Geithner said Sunday.
Interviewed on CBS program "Face the Nation," Geithner said there were "encouraging signs" for the recession-hit US economy but said "we need to keep acting as forcefully as we can" to get banks lending again.
And he denied the government was trying to evade congressional restrictions on executive compensation, after the Washington Post reported officials were worried that banks could be deterred from coming forward for federal help.
After the US government ousted General Motors chief executive Rick Wagoner and demanded deeper restructuring from the embattled carmaker, Geithner was asked if he would take a similar approach to needy bankers.
"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 that it's the kind of restructuring for them to emerge stronger," he said.
"And where that requires a change of the management of the board, we'll do that."
Geithner also addressed criticism that banks might shun a new public-private investment fund designed to clear out toxic assets, if the assets cannot command a healthy price.
"We'll do what is necessary to make sure that our banking system emerges stronger," he said, while side-stepping a question about whether the US administration might force banks to sell their distressed assets.
"Banks have a large incentive now to clean up their balance sheets," he added after the government instituted new accounting rules in a bid to entice buyers and sellers into the market.
For the economy at large, the Treasury chief noted glimmers of hope as mortgage interest rates reach record lows.
"And millions of Americans now are going to be able to refinance their homes, take advantage of lower interest rates. That's cash in the hands of the American people, and that's very powerful," Geithner said.
But after news Friday that the US jobless rate jumped to a 25-year high of 8.5 percent with 663,000 jobs axed in March, he added: "It took us a long time to get here. It is going to take some time for us to work through this."
Despite a storm over bonuses paid out by bailed-out insurer AIG, the Post reported meanwhile that Geithner's Treasury team was setting up intermediary companies to act as a buffer between the government and recipients of federal cash as a way of evading new legal restrictions on executive pay.
"Administration officials have concluded that this approach is vital for persuading firms to participate in programs funded by the 700 billion dollar financial rescue package," the newspaper said.
Geithner responded: "No, that's not true. Now, our obligation is to apply the laws that Congress just passed on executive comp, and we're going to do that."
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