US watchdog calls for bank executives to be sacked.

Already many commentators have remarked on the different treatment of the top GM executive who was in effect fired as a condition for further govt. help and the financial institutions which not only received a virtual blank check without conditions and on top of that in some cases paid big bonuses to those who helped bring on this disaster. It remains to be seen whether anyone will pay attention to Warren. Probably the power brokers would like to see her fired!

<http://www.guardian.co.uk/business/2009/apr/05/useconomy-regulators>US watchdog calls for bank executives to be sacked
James Doran in New YorkThe Observer, Sunday 5 April 2009
Elizabeth Warren, chief watchdog of America's $700bn (£472bn) bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration's approach to saving the financial system from collapse.Warren, a Harvard law professor and chair of the congressional oversight committee monitoring the government's Troubled Asset Relief Program (Tarp), is also set to call for shareholders in those institutions to be "wiped out". "It is crucial for these things to happen," she said. "Japan tried to avoid them and just offered subsidy with little or no consequences for management or equity investors, and this is why Japan suffered a lost decade." She declined to give more detail but confirmed that she would refer to insurance group AIG, which has received $173bn in bailout money, and banking giant Citigroup, which has had $45bn in funds and more than $316bn of loan guarantees.Warren also believes there are "dangers inherent" in the approach taken by treasury secretary Tim Geithner, who she says has offered "open-ended subsidies" to some of the world's biggest financial institutions without adequately weighing potential pitfalls. "We want to ensure that the treasury gives the public an alternative approach," she said, adding that she was worried that banks would not recover while they were being fed subsidies. "When are they going to say, enough?" she said.She said she did not want to be too hard on Geithner but that he must address the issues in the report. "The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous."The report will also look at how earlier crises were overcome - the Swedish and Japanese problems of the 1990s, the US savings and loan crisis of the 1980s and the 30s Depression. "Three things had to happen," Warren said. "Firstly, the banks must have confidence that the valuation of the troubled assets in question is accurate; then the management of the institutions receiving subsidies from the government must be replaced; and thirdly, the equity investors are always wiped out."

Oversight Panel Blasts TARP's Lack of Accountability

This report verifies what everyone has suspected for some time, namely that TARP is doling out funds without any real accountability for what the money is being used for. No doubt Obama will probably address this issue in his speech this afternoon. He has been handed a golden opportunity to be responsive to public concerns. Warren seems to be doing a good job as chair of the oversight panel.


http://www.bloomberg.com/apps/news?pid=20601070&sid=ayn4esm6tYY8&refer=homeOversight Panel Blasts TARP’s Lack of Accountability (Update1)

By Bob IvryJan. 9 (Bloomberg) -
- The Congressional panel set up to oversee the U.S. Treasury’s $700 billion rescue fund criticized the program for failing to require recipients to report what they are doing with taxpayers’ money.The Congressional Oversight Panel, headed by Harvard Law Professor Elizabeth Warren, said a lack of accountability in the Troubled Asset Relief Program “erodes the very confidence” it is supposed to restore. It also faulted Treasury Secretary Henry Paulson for taking “no steps” to use the fund to stem mounting mortgage foreclosures while banks receive bailout loans.“The panel still does not know what the banks are doing with taxpayer money,” the panel wrote in a monthly report published today. “So long as investors and customers are uncertain about how the taxpayer funds are being used, they question both the health and sound management of all financial institutions.”The criticisms echo those made by Congressional Democrats who are pressing incoming President Barack Obama to use more TARP money for consumers hurt by the credit crisis. As many as 2.1 million U.S. homeowners lost their homes or were in some stage of foreclosure through November, according to RealtyTrac Inc., a real estate database. The Treasury has defended its effort, saying it has helped average Americans by preventing a collapse of the financial system.Voting NoThe vote approving the report was 4-1 with Representative Jeb Hensarling, a Texas Republican, voting no, Warren said today in a conference call with reporters.The oversight committee has come under criticism for its partisan tilt. Hensarling, the top Republican on the Financial Institutions panel of the House Financial Services Committee, also refused to endorse the panel’s first report issued last month and said “the jury is still out” on whether it “will eventually be an effective vehicle” for monitoring the TARP.“I still don’t believe that the panel has all the information necessary to do its job,” Hensarling said in an interview today. “It’s hard for me to believe that we can have a comprehensive, thorough, credible report if we’re not having hearings with the upper echelon of Treasury.”The report faulted Treasury officials for failing to answer some of the 45 questions the panel submitted.It questions whether the Treasury Department is complying with Congress’s wish to develop a plan to assist distressed homeowners.Helping Homeowners“There is no mechanism in TARP to help homeowners,” said Rick Sharga, senior vice president at Irvine, California-based RealtyTrac. “When the program was first announced the hope was that by buying these distressed assets the government would be able to renegotiate lower terms with homeowners. But when the strategy changed to injecting money directly into banks it eliminated any direct help to homeowners.”The Treasury Department also needs to publicize the way it values bank assets, the report said.“Until asset valuation is more transparent and until the market is confident that the banks have written down bad loans and accurately priced their assets, efforts to restore stability and confidence in the financial system may fail,” the report said.U.S. banks have lost or written down $678.5 billion, mostly due to mortgage-related investments.Trading Bad AssetsRevealing the prices paid for distressed assets may free up traders to begin buying and selling them again, said Joseph Mason, a finance professor at Louisiana State University in Baton Rouge and a former economist for the Office of the Comptroller of the Currency.“The more transactions we get, whether it’s for failed banks or bad loans, the more we can get people to believe the pricing and reestablish market equilibrium,” Mason said.Treasury has “effectively allocated” $350 billion under the Emergency Economic Stabilization Act, of which TARP is a part, the report said. The second $350 billion hasn’t been parceled out yet.“Congress may want to consider the issues that the Congressional Oversight Panel has raised before it gives out more money,” Warren said in the conference call.House Financial Services Chairman Barney Frank, a Massachusetts Democrat, said today he would submit legislation requiring recipients of TARP funding to file quarterly reports on the use of the money.The oversight panel was set up under the rescue law passed in October. It has three members appointed by Democrats and two by Republicans. Today’s is its second critique of the bailout; the group’s reports are required by the legislation.Bloomberg News filed suit Nov. 7 against the Federal Reserve under the U.S. Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created as rescue attempts for the financial industry during the deepest financial crisis since the Great Depression.

TARP: The new rescue plan for US finance

See the article at politico.com

TAxpayer funded Rescue Plan. This is what it is. The idea of moral hazard as of free markets has gone out the window. Free markets now need huge bailouts to work properly. The real happening is that profits were privatised and now the risks are being socialised and losses paid for by the American public. Capitalism has never been about free markets. It is about profits. If free markets do not bring profits there must be subsidies or combines or other methodologies to get around the discipline of the market. Free market ideology is used to justify capitalism and to criticise government intervention, regulation, etc. but when it conflicts with profit the ideology is thrown out the window in a second.
Actually TARP stands for Trouble Assets Relief Plan. It is the Fed prescription for financial constipation.