Washington, (PressExposure) February 11, 2009 -- Reactions to 'Treasury Secretary' Timothy Geithner's guidelines that were announced yesterday ranged from 'well meaning' to 'toothless' which in essence is exactly what guidelines are and only time will tell whether banks and other companies will adhere to some or any of them.
What Are The Suggested Guidelines?
- A joint public-private sector fund that will buy as much as $1 trillion of illiquid bank assets.
- A $1 trillion program that will offer new credit to consumers and businesses.
- Banks must be more transparent and accept additional restrictions on acquisitions, dividends and executive pay.
- The administration will inject additional taxpayer funds into banks.
Geithner's announcement included the following,
"Our plan will help restart the flow of credit, clean up and strengthen our banks, and provide critical aid for homeowners and for small businesses. As we do each of these things, we will impose new, higher standards for transparency and accountability. Banks that negotiate exceptional assistance deals with Treasury, such as the targeted relief provided to Citigroup Inc. last November or to Bank of America Corp. in January, will be required to show how every dollar of capital they receive is enabling them to preserve or generate new lending".
His suggested cap on executives salaries and bonuses is $500,000 but additional compensation in the form of restricted stock would be permitted, which would open a very big door, very wide!
Reactions to his announcement include, "The new conditions are all sensible, but the proof is in the pudding and the real question will be how tightly these regulations are going to be put into effect" - Robert Reich, who was an informal adviser to Obama during his campaign.
"Geithner didn't put it in writing and unless the government has the power to remove executives, there's no chance here of success. Other than Fannie Mae and Freddie Mac, which the government seized in September, the Treasury so far hasn't publicly forced a management change at any financial institution" - Ralph Nader.
Thus far, more than 360 banks have signed up for cash injections that range from $1 million to $25 billion but few if any restrictions were imposed although the recipients did have to agree to additional oversight. Under pressure at a 'House Financial Services Committee' hearing yesterday, Fed Chairman Ben S. Bernanke implied that the central bank might disclose more information about emergency lending programs that have added to about $2 trillion to the Fed's balance sheet.
Bernanke said he'd "initiated a review, to be led by Vice Chairman Donald Kohn", "with a presumption that the public has a right to know and that nondisclosure of information must be affirmatively justified by clearly articulated criteria for confidentiality".