Professor Elizabeth Warren, head of the TARP’s Congressional Oversight Panel, says that the CEOs of major TARP recipients should be fired, and the banks’ shareholders wiped out:
"The management of the institutions receiving subsidies from the government must be replaced," she said in an interview last week.
Warren picked out the head of Citigroup for special mention, but will recommend all bailout recipients -- which include Goldman Sachs and Bank of America -- get the same clean-out at the top. . . .
"It is crucial for these things to happen," she said. . . .
Together with the firings, Warren said other essentials needed to ensure the banks' survival include accurate valuation of the troubled assets currently being held, and wiping out current shareholders -- a move that would create turmoil in stock markets around the world.
Subtle! Logic (and fairness) of move not immediately apparent, however. . . .
First, most of the major TARP recipients (like, all but two, if memory serves) didn’t even want the money in the first place. Now that the banks have been forced to take it anyway, the Professor would reward their CEOs by canning them? Remember, too, the executives Warren wants fired--people like Richard Davis, Jamie Dimon, and John Stumpf--are some of the most capable anywhere in American business. They were emphatically not part of the cause of the financial industry’s problems, and have been instrumental in several of the key fixes to date, like, say, via Morgan’s (MS) emergency acquisition of Bear Stearns, and Wells’s (WFC) acquisition of Wachovia. How the banking industry will recover faster with those guys on sideline is a bit of a mystery.
For that matter, a unilateral wipeout of shareholders by the government wouldn’t be such a great way to attract new private capital to an industry that Warren herself seems to think desperately needs some. . . .
It would be easy to dismiss the woman as irrational, but she teaches at Harvard! More likely explanation of Warren’s weird recommendations: She’s a long-time critic of the banks, and never misses a chance to stick it to them when she can. There’s nothing the matter with that, of course. It’s a free country. But why anyone thinks Elizabeth Warren can be a fair-minded arbiter of the execution of the TARP plan remains a mystery. . .
