Timothy Geithner said that the U.S. government was prepared to make the changes of command necessary at banks that require “exceptional” financial support from the Treasury. According to Bloomberg, the Treasury secretary claimed that if certain banks could not survive without taxpayer assistance, Geithner would ensure that these same taxpayers were protected through a change at the executive and board levels.
In an interview with CBS’s Face the Nation program yesterday, Geithner cited instances at AIG, Fannie Mae, and Freddie Mac in which board and management changes came about after substantial financial infusions. “If in the future, banks need exceptional assistance in order to get through this, then we will make sure that assistance comes,” said Geithner. “…Where that requires a change in management and the board, then we will do that.”
Geithner also addressed the ever-controversial subject of executive pay, claiming that the presidential administration would not allow assisted banks to sidestep the rules as they relate to compensation. “Our obligation is to apply the laws that Congress just passed,” said Geithner. “We want the American taxpayer’s assistance going to generate greater lending, not providing excess compensation.”
A Washington Post articleclaiming that the administration’s bailout initiatives are beingdesigned to allow firms receiving government funds avoid restrictionsimposed by Congress was deemed false.
Obama senior adviser David Axelrod told Fox News Sundaythat the president does not want the prospect of compensation limits tokeep them from joining in the Treasury’s financial rescue package. Somefinancial firms have cited a fear that this could hinder their abilityto cleanse toxic assets from banks’ books and jump-start lending as whythey are hesitant to join in.
Geithner added yesterday that the government would removemanagement of big banks that require “exceptional assistance,” as itdid with GM’s CEO and chairman Rick Wagoner on March 29.
Another topic of discussion was the recent decision by the Financial Accounting Standards Board to allow companies to use “significant” judgment in assessing the value of toxic securities. The accounting change, which allows companies to avoid selling bad assets that would otherwise have to be written down, was approved at an April 2 FASB meeting.
“We will do what’s necessary to make sure our banking system emerges out of this stronger,” said Geithner.