Elizabeth Warren, chair of the congressional oversight committee monitoring the government’s Troubled Asset Relief Program (TARP), 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, according to The Observer.
“The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous,” Warren said.
The chief watchdog of America’s $700bn bank bailout plan, 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.”
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.” [via The Observer]