[Posted by Karl]
Elizabeth Warren, chair of the Congressional Oversight Panel for the Troubled Asset Relief Program, reportedly plans to call for the removal of top executives from Citigroup, AIG and other TARP fund recipients — and for shareholders in those institutions to be “wiped out.”
Treasury Secretary Timmy Geithner seemed open to the idea of axing bailee execs during his turn on CBS’s Face the Nation yesterday.
In one sense, following Pres. Obama’s intervention with General Motors, this attitude is not surprising:
In any business-government partnership, Obama himself expects to play the dominant role.
“He’s realizing, ‘Hey, the economy’s mine now, and I better do it my way,’” said the official. “So the administration is collaring people and letting them know who’s in charge. The days of saying, ‘It’s not our economy’ have come to an end.”
An Obama administration official said the president’s hard-nosed approach will continue.
Indeed, Obama’s sitdown with bank CEOs — including his opposition to the return of TARP funds by the big banks — has people like Stuart Varney asking whether Obama’s real agenda is gaining control of the financial system to advance his political agenda. Obama certainly would be in a position to advance the agenda of his old ACORN pals under this scenario.
On the other hand, the Geithner scheme provides that unregulated hedge funds and private equity firms will “bail out” regulated institutions, which will enrich people like George Soros and former Countrywide execs, assuming they are not outbid by the likes of Citigroup and Bank of America, who are aggressively buying up the shaky mortgages that are supposedly at the heart of the problem. Major banks may even use TARP funds to buy large amounts of toxic assets from one another to inflate their books. The Obama administration is engineering its new bailout initiatives to allow beneficiaries to avoid restrictions imposed by Congress, including limits on lavish executive pay. Large shareholders in these firms, such as Obama pal Warren Buffett, actually have been the primary (perhaps only) significant beneficiaries of the TARP. All of which suggests that the TARP recipients think there is enough benefit to them to stay under the TARP.
People like Glenn Greenwald may be up in arms over the Washington-Wall Street “oligarchy,” but these competing storylines suggest the question of the moment is which side has the upper hand: Monsters or Aliens? I am pretty sure the answer is not Taxpayers.
Update: The bank stress tests currently underway are “a complete sham,” says former senior bank regulator and S&L prosecutor William Black. Go Monsters! Or is it Aliens?