Tim Geithner said on Sunday's Face the Nation that
the Treasury might fire the heads of big banks that depend on financing
from the federal government, just as it summarily deposed Rick Wagoner,
the former CEO of General Motors -- and before Wagoner, the heads of
AIG, Fannie Mae, and Freddie Mac. "Where that requires a change in
management and the board, then we will do that," said Geithner.
I
suppose it's comforting to know our government stands ready to fire
corporate executives and directors whenever taxpayer money is on the
line. But I suspect Geithner's new tough line is mostly designed to
reassure a public that's lost all faith in the wisdom of bailing out
Wall Street.
For the sake of the argument, assume he's sincere.
What criterion will an axe-wielding Geithner be using? If precipitous
loss of shareholder value is enough to "require a change in management
and the board," presumably every CEO and director of every big bank now
being bailed out should be fired, starting with Ken Lewis of Bank of
America.
If the criterion is diversion of taxpayer money to uses
other than Congress intended when it first authorized the $700 billion
bailout, the list of soon-to-be-fired CEOs is a bit shorter but still
large. Surely it includes all the bailed-out banks that continue to fly
their executives around the world in company jets, award them
extraordinary pay packages, and run junkets at fancy resorts.
Citigroup's Vikram Pandit (who collected $38.2 million for his
taxpayer-subsidized services in 2008) comes immediately to mind.
Why
stop there? Perhaps Geithner intends to fire executives and directors
of any company that's dependent on taxpayers and is now losing money.
Just think of the corporate house-cleaning this will mean. Hundreds of
agribusiness executives are now at risk as are scores of military
contractors. Hell, the whole pharmaceutical industry depends on
taxpayer support (research subsidized by National Institutes of Health,
sales subsidized through Medicare and Medicaid), and it's doing badly,
so their executives and directors will be gone soon, too.
All
told, about one out of every five large American companies depends on
government contracts, and a majority of these firms are losing money
right now. So ... off with their heads.
