Hold CEOs of big banks accountable
The congressional panel in charge of overseeing TARP says it has achieved mixed results at best. Commentator Robert Reich says it's time the CEOs of the big banks that received trillions in bailout funds be held accountable.
Robert Reich (Robert Reich)
More on Commentaries, America's Financial Crisis
TEXT OF STORY
Kai Ryssdal: The government board that's in charge of keeping an eye on the TARP is out with its latest report. And the verdict is mixed, at best. The panel says it's still not sure Treasury Secretary Timothy Geithner has a long-term strategy for saving the banks, despite the trillions of taxpayer dollars that are on the line. Commentator Robert Reich says it is past time to start holding people accountable.
ROBERT REICH: Tim Geithner says he might fire the heads of big banks that are being bailed out, just as he disposed of Rick Wagoner, the former CEO of General Motors. And before Wagoner, the old heads of AIG, Fannie Mae, and Freddie Mac.
Geithner's tough talk is designed to reassure a public that's lost all faith in the bank bailout. At the rate the bailout money is being spent, Geithner will have to go back to Congress to ask for more. And, just as he did with the pending auto bailout, he'll have to claim a scalp or two to prove he means business.
But that may not be enough to convince the public. After we've sent Wall Street $4 trillion so far -- including $590 billion in direct federal spending, as well as trillions in loans and guarantees -- the Street still isn't lending much to Main Street.
There's been a small uptick in lending to big businesses lately, but small businesses continue to be squeezed. Big banks are still hoarding cash, still paying their executives princely sums, still using corporate jets and entertaining themselves at fancy resorts. It would have been more efficient to bypass Wall Street altogether and lend the $4 trillion directly to Main Street.
So maybe Geithner really should fire many of them. Explain to me, for example, why Kenneth Lewis is still the CEO of Bank of America, after blowing the purchase of Merrill Lynch? Or why Citigroup's Vikram Pandit is worth the $38.2 million he collected last year, after Citigroup so far has sucked up $52 billion taxpayer dollars? I mean, we taxpayers now own a big chunk of these companies. The least we can demand is accountability.
Yes, I know: Wall Street needs all the talent it can find, and we don't want government bureaucrats running our banks. But we do need people who understand that when they take billions of dollars of public money they have public responsibilities: to forego big paychecks, to clean up their balance sheets, and to make the financial system work for the rest of us. If they don't get that, they should join the millions of other Americans who have lost their jobs since the downturn started.
Ryssdal: Robert Reich is a professor of public policy at the University of California, Berkeley.
Comments
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04/09/2009
Jeff Behm makes a good point about holding Congress accountable for a good deal of the banking mess. AGAIN, we get back to the topic of lobbying. Why in the world should banks lobby Congress? No need to answer that -- it's a rhetorical question. (But I'll answer it anyway.) The only reason I can think of is to ensure that laws are more fair for bank owners than for bank customers. I believe that before we can get a handle on the banking muddle, we need to look at lobbyists who made certain their intersets were taken care of -- and then probably laughed all the way to the bank (sorry, I couldn't help the pun).
From Boston, 04/09/2009
I worked for one of the companies mentioned, had spotless performance reviews and nothing but praise from my managers, made a tiny fraction of what the CEO does, and got laid off. AMEN!
From GA, 04/09/2009
Yeah I'm in aggreement with Gb Gb. Shareholders should be the ones pissed at excess CEO compensation. If they aren't the ones kicking out CEOs, what place does the Gov have?
Also, CEOs will have a harder time recieving a large paycheck if their firm is going through Chapter 11 or 13.
From Princeton, NJ, 04/09/2009
While I agree with Mr. Reich that we must hold CEO's accountable, I'd like to ask Mr. Reich why he doesn't include the US Congress in his accountability plan? Barney Frank & Chris Dodd have consistently accepted big $$$ from the very financial firms they are supposed to regulate, and --- surprise! Both have consistnely voted against the public interest, and in favor of loopholes & deregulation. Now we expect they will fix things? Hah.
From Sioux Falls, SD, 04/09/2009
"CEO Vikram Pandit has advised Citi’s board that he will accept no incentive compensation and will accept $1 base pay until Citi returns to profitability."
Citi 2009 Proxy Statement, page 47
http://www.citigroup.com/citi/fin/data/ar09cp.pdf
04/08/2009
Enought with this BS already!! Let the share holders and company boards deal with the accountability issues. The first thing govt should do is GET THE HELL out of bailout business. If a company made mistakes, let it fail. There is nothing wrong. Companies fail all the time? Since when bankruptsy is not an option for a failed company. Did congress pass a new law? Another issue that keeps coming is "too big to fail". If that is true what were regulators doing? Sleeping at the wheel? Why didnt they ask for new laws to be passed before these things happened, so that companies dont pose that risk. Even after all this mess, nothing has been done until now to prevent this. Infact congress is going to wait for 1 year and pass some meaningless laws that dont serve any purpose.
From Alpharetta, GA, 04/08/2009
Robert Reich asks a question that has been on my mind for many years as a private shareholder. Why can't we hold CEOs accountable for failure? It's all too easy to explain why Kenneth Lewis gets to keep is job or why Vikram Pandit did not see a cut in salary commensurate with Citigroup's losses. In each case the Board of Directors did not see fit to make any changes or take any action. In theory, a companies board represents the shareholder's interests, which should include holding all the corporations officers to 'clean up their balance sheets' and ensure any compensation paid is commensurate by return on investment. However in practice it has often seemed that boards are there to aid CEOs in looting the company, approving ever larger and more extravagant perks. If these boards could be so carefree with private money, why are we in the least surprised how they are behaving with public money?
I fail to see how Geithner scapegoating a few CEOs will bring about any real change. The system that created and maintains these superstars will remain intact. Worse, allowing him, or any other bureaucrats or politicians free-rein to pick winners and losers in this mess will do nothing more than hand decision making over to another group we should be just as disgusted with. The current crop of politicians, appointees and regulators are no less to blame in all this mess. For example, Barney Frank opposed reforms for Fannie Mae and Freddie Mac. John McCain expended none of his political influence to champion real change after expressing concerns about the system.
Past performance of future results for investments, but past behavior is still the best guide for predicting human behavior. So instead of being placated by empty promises of change from those who've proven ineffective, at the least. Why don't we demand some real change, change that distribute money and power away from the few and leaves each of the rest of us with more control over our own fate? Mr. Reich is right, it would be more efficient to bypass Wall Street (and Washington) all together and return the money directly to Main Street. So why aren't we looking for those options?
From VA, 04/08/2009
Professor and former Labor Secretary Reich makes a comment that we do not want "Wall Street needs all the talent it can find, and we don't want government bureaucrats running our banks" which is generally speaking true except that in current economic situation, I am wondering what is wrong with "government bureaucrats" running the banks? I mean as bad as the bankers, who are supposed to be the champions of the free market capitalism, have run their businesses, how worse can "government bureaucrats" be?
It is about time we began questioning the established notion that private sector is always better and more efficient than the government.
From royal oak, MI, 04/08/2009
Robert Reich recited the well worn formula
'We don't want government bureaucrats running our banks'.
Given the competence of the FDIC crew that
handles failing banks, I, for one would be glad
to have someone so competent running our banks.
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